Cathy Curtis

S4E6: The Unexpected Benefits of Working with a Private, Professional Fiduciary with Sara Ecklein

The Unexpected Benefits of Working with a Private, Professional Fiduciary

Why You May Want to Consider Partnering with a Private, Professional Fiduciary

In this episode, I interview Sara Ecklein, a private, professional fiduciary. In addition, Sara is the founder of Trust and Honor, a fiduciary agency. Trust and Honor serves as a partner and compassionate advocate in managing and protecting the personal affairs, property, and assets of clients in the San Francisco Bay area and beyond.

I was particularly interested in talking with Sara because I work with many single women who may not have a family member or friend who could take on this role for them when needed.

Sara’s calling to become a fiduciary and found Trust and Honor was informed by personal experience with loss and end of life care. She has been working in the fiduciary profession since 2014 and has a rich and varied background in issues facing senior and disabled populations, including end of life care, financial abuse, and navigating challenging support systems and family dynamics.

Sara holds a Bachelor of Arts degree in Political, Legal, and Economic Analysis from Mills College. She is also, in addition to being a licensed Professional Fiduciary, a Certified National Guardian and a general member of the Professional Fiduciary Association of California.

In this episode, Sara and I discuss the role of a private fiduciary and the journey that led Sara to her position as founder of Trust and Honor. We also talk about who can specifically benefit from partnering with a private, professional fiduciary and why and when someone may seek her services. 

For example, some of Sara’s fiduciary services include:

  • Being a trustee guardian and/or an estate executor
  • Daily bill paying and money management
  • Healthcare representation agent
  • Power of attorney or executor for seniors with no spouse or family
  • Conservator for those who are mentally or physically incapacitated

Meanwhile, Sara and I get into the specifics of special needs trusts, their complexities, and common mistakes that non-professionals make when administering these trusts. In addition, we talk about long-term care insurance and how it can play into end-of-life planning. And at the end we talk about Sara and some of her amazing personal accomplishments.

I really enjoyed this conversation, and I think it’s especially important for independent women to better understand what someone like Sara does and how partnering with a private fiduciary may be beneficial. With that, I hope you enjoy this episode of Financial Finesse.

Episode Highlights

  • [03:45] Sara Ecklein describes the role of a private, professional fiduciary.

  • [09:28] Sara shares why and when someone may seek her services as a private fiduciary and what her intake process looks like.

  • [25:26] How working with a private, professional fiduciary can benefit clients when it comes their healthcare.

  • [39:20] Sara Ecklein and Cathy discuss special needs trusts and why it can be helpful to have a trustee who specializes in this area.

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S4E6 Transcript: The Unexpected Benefits of Working with a Private, Professional Fiduciary

Cathy interviews Sara Ecklein, a private, professional fiduciary and founder of Trust and Honor in the San Francisco Bay Area.

[00:03:13] Cathy Curtis: Hi, Sara. Thank you so much for joining me on my podcast, Financial Finesse. This is a topic that I’m really intrigued about as I’m a financial advisor. And I believe you’ve told me that your industry is in its infancy. So, I want to learn as much as I want to share things with our listeners, so thanks.

[00:03:40] Sara Ecklein: Yeah, Cathy, it’s great to be here. Thank you for having me.

[00:03:45] Sara Ecklein describes the role of a private, professional fiduciary.

[00:03:45] Cathy Curtis: Great. So let’s get started with some basics. Can you describe what exactly is a private, professional fiduciary?

[00:03:56] Sara Ecklein: Yeah, so we’re in the state of California. So California is one of few states that has a license, but specifically for private professional fiduciaries that came about, I believe in about 2007.

[00:04:13] Sara Ecklein: Licensing became required in 2009. So that’s where this work has been done for very long. But in terms of licensing, it’s fairly new to the state and we’re one of only few that do have licensing.

[00:04:30] Cathy Curtis: Interesting. So just stepping back, so there’s a distinction here. It’s the private part, right? Because there’s always been corporate professional fiduciaries, is that.

[00:04:42] Sara Ecklein: Yes. And even the term like fiduciary, a family member, a non-professional can be acting in that role. So that’s where we really like to have that professional, the private professional piece in front of the fiduciary name, just making it clear the relationship.

[00:04:58] Cathy Curtis: Okay, that makes sense. And why is it that some states do not have this licensing?

[00:05:07] Sara Ecklein: I really can’t answer that. But California is steps ahead of most. So there’s the National Guardian Association and that I would direct people if they’re looking for a professional fiduciary and they’re not in the state of California, that would be a place to start.

[00:05:26] Cathy Curtis: Okay, great. So tell me your journey to becoming a private, professional fiduciary.

[00:05:34] Sara Ecklein: Yeah, so I came to this work fairly young. My path really started feeling very cold towards serving an end-of-life care. I was with a loved one during her last three days of life, and I just felt this overall sense of calling and leaning into supporting her through the dying process. And so I really considered, I thought I was going to be a hospice nurse. So that’s really where my kind of career began to take shape and form.

[00:06:07] Sara Ecklein: I already had a bachelor’s degree, so it was looking like I was needing to go back to school, and I went and got my nursing assistant license just to get my feet wet. And make sure before going back to school, that would be the right path. And I’m happy I did that because I quickly realized that nursing wasn’t quite the right fit.

[00:06:28] Sara Ecklein: And eventually my path led me to working in a private fiduciary’s office out in Sacramento. And really the rest is history. I fell in love with the work. It really combined a lot of my personal strengths and interests. I really described it as like a head and heart alignment of very engaging work. Every, every client is unique, and there’s absolutely always that piece of being of service and making a difference.

[00:06:56] Sara Ecklein: And of course, there’s always that thread going through every case at the end-of-life care. So even if it’s before someone passes, I work with clients in the planning phase. And so it’s really building the relationship long before they need a professional fiduciary to act. But it’s really supporting families and planning.

[00:07:19] Sara Ecklein: And then of course, I do support clients through that transition, acting as agent for healthcare, also as their trustee power of attorney, and then after they’ve passed, really being the one that’s entrusted to carry out their final wishes.

[00:07:36] Cathy Curtis: This is a major responsibility. It is fascinating to me because that’s, that is a lot of different roles that you take on for the individual.

[00:07:45] Cathy Curtis: It crosses the spectrum. And I’m wondering, so how does a client find you generally speaking?

[00:07:55] Sara Ecklein: For the most part, they’re finding me. They’re either referred to me by their attorney, their estate planning or elder law attorney, or through other professionals like yourself. Occasionally a CPA will send their clients come tax time to me. But for the most part it is through estate planning attorneys is where clients are connected to me.

[00:08:19] Cathy Curtis: Okay. So is your clientele mostly a wealthy clientele?

[00:08:26] Sara Ecklein: Not always. I would say there of course needs to be a certain amount of assets. Otherwise getting connected with the public guardian is usually where I direct people if they really don’t have many assets. But they do need support with managing affairs.

[00:08:43] Sara Ecklein: In the Bay Area, it is hard because middle classes seeming like much larger estates now. But typically, I have a minimum of about $500,000 in assets to engage my services.

[00:09:00] Cathy Curtis: Okay, that makes sense. And then it sounds like you act as a resource for those people who don’t have the asset level, and you refer them to other resources such as the public guardian.

[00:09:16] Sara Ecklein: Yes, absolutely. And a lot of times at that point it might not even be the client themselves reaching out to me. It might be a family member, even an attorney reaching out to me asking, “Who do you know or who can help?”

[00:09:28] Sara shares why and when someone may seek her services as a private fiduciary and what her intake process looks like.  

[00:09:28] Cathy Curtis: Okay. Now, in many cases, family members just take on this role, the roles that you take on, right? So is it mostly single people that contact you, or is it a family member that says, “Oh my gosh, I wouldn’t even know where to begin to do all these things. I need help.” What happens?

[00:09:54] Sara Ecklein: It’s a combination. I do have many clients that they really don’t have any family living. Maybe they never married, they never had children, and now they’re in their eighties and they’re beginning to decline and need some support.

[00:10:11] Sara Ecklein: But I also have plenty of people that have families and are married. And I’m thinking in the situation of planning, I work with a lot of couples where they’re planning in the event that one of them has passed and the other one’s incapacitated. Sometimes they have children and sometimes they don’t. If their children don’t live locally, and we’re seeing this more and more, families are living further.

[00:10:37] Sara Ecklein: That doesn’t really help when you know mom or dad need that hands-on support, setting up bill pay and care management and all of that. It can be really a full-time job.

[00:10:49] Cathy Curtis: Yes, definitely. It really can. Yeah, and, and it’s, in many cases, I’m sure children are busy with their own lives, their own children, careers, and they want the support.

[00:11:01] Sara Ecklein: So that’s, that, and then we’re also seeing divorces and then second or even third marriages and these blended families.

[00:11:09] Sara Ecklein: It can be really helpful to just have a neutral party act in the role of trustee so that no one’s feeling like they’re taking sides or playing favorites. And it can just make things much easier when it is time to administer the trust.

[00:11:27] Cathy Curtis: Okay. So in that case, you do not get involved in the affairs until the trusteeship is triggered, which means someone dies or gets very ill.

[00:11:41] Sara Ecklein: Yeah. Typically, it just depends on the documents, but for the most part it’s at the time of incapacity or death.

[00:11:50] Cathy Curtis: Okay. Depends. Let’s take, I’m gonna just give an example situation. Let’s say there’s a single woman in her eighties, lives alone, is in fairly good health, but is thinking towards the future. Family members have died, and she contacts you and says,

[00:12:11] Cathy Curtis: “I’m not quite sure what’s gonna happen with my health in the next few years. And what can you do to help me make sure my affairs are in order and I’m taken care of?” What would your response be and what’s your process?

[00:12:25] Sara Ecklein: Yeah. When I start working with clients in that phase, I do require that they’re already working with an estate planning attorney.

[00:12:33] Sara Ecklein: Most of them already have, and they are working with their attorney. Their attorney is the one that’s advising them that you really need to get someone in this place. You need to name them in your documents. If they’re not working with an attorney, that’s gonna be my first requirement and step that if they wanna work with me.

[00:12:53] Sara Ecklein: You need to find yourself an estate planning attorney. So in those roles, this scenario you laid out, it sounds like this woman is going to need help, not only with her finances and bill pay and acting if she lacks capacity and is needing support while living. And also needing potentially a trustee if she has enough assets.

[00:13:15] Sara Ecklein: But she’s also going to be needing support with healthcare decision making. So typically, I’m named in all three roles, successor, trustee, durable power of attorney and agent for healthcare in the advanced healthcare directive. So once I have a consultation with a client and we both feel like it’s the right fit, I have a pretty thorough intake process.

[00:13:41] Sara Ecklein: It does include reviewing a draft of their estate planning documents, of course, and getting copies of all signed documents once they have been executed. And then I have my own intake forms that are pretty thorough and in depth that’s not only gaining information from them about the actual trust assets.

[00:14:03] Sara Ecklein: But it’s really gathering information about them as a person. And as a fiduciary, I like to plan in the event of all the scenarios of when I’m going to get involved. And more times than not, I’m getting involved in the event of incapacity. It’s not death. Most people don’t just pass away in their sleep.

[00:14:24] Sara Ecklein: It’s a subtle, slow decline over typically many years. In that situation, I’m really working alongside the client. And supporting them.

[00:14:35] Cathy Curtis: And when you say, just specifically when you say supporting them and working alongside them. So during this phase where they’re still healthy and not incapacitated, do you set up regular meetings with them or touchpoints of some kind?

[00:14:52] Sara Ecklein: Yeah, so I have annual drumbeat that I like to have a check in phone call and just make sure nothing’s changed on their end. I also see it as a time for me to update them on myself and my business. The profession. For professional fiduciaries, we have to be named individually and document as much as I have. A business, Trust and Honor, that business can’t be named in any of those roles that we outlined before.

[00:15:20] Sara Ecklein: Successor trustee, durable power of attorney, agent for healthcare. I think it’s important to continue that relationship and keep them up to date on where am I with the business and also where are. I found that over the years we don’t have that check in. People update their phone number, they move, they even update their estate planning documents, and a lot of times the successor trustee isn’t kept up to date.

[00:15:48] Sara Ecklein: So that’s where I find that’s really crucial and important. And then I really leave it up to the client to book a consultation on an as needed basis. So sometimes, significant change going on in their life, or maybe they’re making significant changes to their estate planning documents. They can always initiate scheduling an hour consultation with me and just going through the changes they’ve made.

[00:16:16] Cathy Curtis: Okay. Now, as far as the licensing, the role you take on is a very personal role. As trustee, it basically gives you complete authority over your clients’ assets and everything. So what kind of, what happens with the licensing? A big background check, all those things. But could you talk to that a little bit?

[00:16:45] Sara Ecklein: Yeah, so we’re licensed through the Professional Fiduciary Bureau. It’s a branch of the Consumer Affairs in the state of California. So our license renews every year, which is I think is much more frequent than most professional licenses. And we have to report how much, how many assets are under management, how much we’re really controlling, and the types of cases and the number of cases.

[00:17:11] Sara Ecklein: So for my practice, I don’t specialize in conservatorships or any kind of court supervised cases. Some fiduciaries that’s really heavy in their practice. So there’s, the bureau really is asking us every year, how many conservatorships do you have? How many powers of attorney do you have? How many probated states do you have?

[00:17:36] Sara Ecklein: How many trusts do you have? And then if you’re managing any funds for those clients, the total of them.

[00:17:44] Cathy Curtis: Okay, let’s talk specifically about managing funds. So in this part I’m really curious about, and I am an investment advisor, a registered investment advisor, and some of my listeners will be other financial advisors and probably will have similar questions.

[00:18:03] Cathy Curtis: Can you actually manage assets, meaning buying and selling securities?

[00:18:10] Sara Ecklein: No, I don’t. I really, my license doesn’t allow for me to give legal advice, tax advice. I’m not a financial professional, so I’m really working alongside a team. Come tax time, I’m working with a CPA to file the trust tax return of the client’s tax return.

[00:18:32] Sara Ecklein: I also am typically working alongside an investment advisor, so they’re the ones that’s really managing the portfolio.

[00:18:41] Cathy Curtis: All right, so let’s take this. This woman, this 80ish woman who did have an estate attorney because she is the one that referred to you, okay? This woman doesn’t have an investment advisor, but she has two million at Vanguard. Let’s say in that case, what happens?

[00:19:06] Sara Ecklein: It depends if the client still has enough capacity to communicate her wishes. Sometimes clients prefer that I continue that relationship and working with the financial advisor of their choosing. If not, if there maybe A) isn’t a preference, or B) I’m fully acting and this person really is not able to communicate their wishes, then I likely will be moving the account to a financial advisor that I work with regularly.

[00:19:35] Sara Ecklein: And I do that for several reasons. One of the pieces is that there is an efficiency to this. And wearing the fiduciary hat, I’m definitely trying to preserve the trust assets. My time does equate to fees. So that’s where, if I’m working with only, if I’m working with a financial advisor and there’s a handful of cases we can go through a quarterly or semi-annual review fairly quickly versus working with 20 different financial advisors, all of my clients choosing.

[00:20:12] Cathy Curtis: So that really makes sense. Okay. In the case of A, let’s say I referred you a client. You have the option to say, “Thank you for referring me the client, Cathy, but I need to run my practice efficiently. And I have a financial advisor that I work with.”

[00:20:33] Sara Ecklein: That is true. I think what helps, the other piece is that, especially with the financial services industry as there’s different types of advisors. And so a lot of clients are working with broker dealers. I find that’s, I end up having a conflict as a private fiduciary because I know that broker dealers are held to a different standard, not to that fiduciary standard that an investment advisor.

[00:21:00] Sara Ecklein: So that’s another reason where my preference is to work with financial advisors that I’ve already vetted and screened and they understand the standard that I’m held to, which private fiduciary are held to the Uniform Prudent Investors Act. We usually just call it the UPI. And so the financial advisors that I work with are familiar with that standard and would be diversifying the portfolio with that in mind and keeping that in mind as I’m acting as trustee or power of attorney.

[00:21:36] Cathy Curtis: Okay, that, that really makes sense to me. I’m a fiduciary advisor, just for example, a CFP, member of NAPFA, which is the National Association of Personal Financial Advisors, and need to be a fiduciary as a registered investment advisor. So I would be the type of advisor that you would probably feel more comfortable working with.

[00:22:00] Cathy Curtis: Because I’m a fiduciary. Versus a broker dealer or a professional from one of the big banks, et cetera, that I’m not saying they’re not good advisors, but they are not held to that same standard.

[00:22:16] Sara Ecklein: That’s correct, yes. I recently had a consult, I believe it was last week, and this client really communicated her wish of continuing that relationship.

[00:22:27] Sara Ecklein: What’s great is we’re again working in the planning phase, and so I’m able to make note of that, that this really is her preference, and I’m also able to ask the questions. Look up this, this person’s license, and it’s very clear she is that kind of fee only fiduciary financial advisor. And so that already brings me some level of comfort just knowing that they, they’re held to that same fiduciary standard.

[00:22:53] Cathy Curtis: Yeah. So interesting. And I’m sure I’m not the only financial advisor that this happens to. Because I, like you, I have long-term relationships with my clients, and I get to know them very well. And some of them don’t have family or family they trust, and so they think that Cathy knows me really well.

[00:23:20] Cathy Curtis: She knows all my financial circumstances. She’s the obvious choice to be trustee and healthcare or financial power of attorney. And in my industry, that is a complete, not a complete, no-no. You can do it, but you have to do, you have to form a different kind of business and be willing to be audited every year and lots of regulatory hoops to go through.

[00:23:47] Cathy Curtis: So I’ve chosen not to do that. I do not want to take on that responsibility. So in my case, I many times need to find somebody for this client who wants a person to act in these roles, and it’s been a challenge for me. And so I was really glad to, I forget now how I was introduced to you.

[00:24:13] Sara Ecklein: I believe it was Ruth connected us.

[00:24:16] Cathy Curtis: Oh, okay. And then I came to find out from you the industry hasn’t been around that long, and then it made sense to me. Maybe that’s why it hasn’t been so easy to find somebody.

[00:24:29] Sara Ecklein: With professional fiduciaries, it’s, it is a pretty, there’s not a ton of us. I believe there’s less than a thousand actively licensed fiduciaries in the state.

[00:24:41] Sara Ecklein: So we’re a pretty small profession. That being said, a CPA, an attorney, their license allows for them to act in this role. So it’s not counting those professions.

[00:24:58] Cathy Curtis: Do you think most want to do that work in addition to their core?

[00:25:10] Sara Ecklein: I find more times than not, they’re not wanting to act in those roles for many different reasons. But yeah, trust administration, it is, there’s a lot of practicalities and things are always changing, so I could see more.

[00:25:26] How working with a private, professional fiduciary can benefit clients when it comes their healthcare.

[00:25:26] Cathy Curtis: Yeah. Not only the trust administration, it sounds like you get involved in healthcare. Talk about that a little bit.

[00:25:32] Sara Ecklein: Yeah. I actually think that’s really one of the benefits of working with a professional fiduciary. Our license allows for us to act in this role. From my understanding, like a corporate trustee, they cannot act in the role of agent for healthcare or even power of attorney.

[00:25:56] Sara Ecklein: If someone, this model client you’re describing, a single woman, really very little family or friend support, and she’s needing someone to act in all those roles. She could name a, like a bank. Let’s just use the example of Wells Fargo as her successor trustee. But that still doesn’t solve the problem of who’s going to act in those other roles.

[00:26:20] Cathy Curtis: So your job is very unique in that way. It really is.

[00:26:24] Sara Ecklein: Yes. And I, for me, I love the kind of blend of the work of working from the financial piece and working with the numbers and the administrative side, but also really working with people and serving people. And that healthcare piece. When you’re acting in all of those roles, I find serving clients, it becomes that much more special of a relationship. Because you really get to know your clients very well.

[00:26:52] Cathy Curtis: Can you describe a situation where you had to get involved with the healthcare situation just to illuminate what you do.

[00:27:03] Sara Ecklein: Yes. So I actually started working with a client about two, two years ago, maybe a year and a half ago. Her attorney referred her to me. She was having a medical crisis.

[00:27:19] Sara Ecklein: Going in and outta the hospital, going home, falling, going back to the hospital, getting discharged 20 days later.

[00:27:29] Cathy Curtis: And not unusual that, and this will happen probably to most of us when we get older. Right?

[00:27:34] Sara Ecklein: Yes, hopefully not, but yes. This is not unusual, unfortunately at this point in time.

[00:27:43] Sara Ecklein: And she’s a lot of kind of what you were describing with this model client or sample client. She really has no family and never married, no children, and she really needed to have someone to step in and quickly figure out what’s going on with her medically and communicate with the medical providers. Because memory loss was beginning to be a factor in in her care.

[00:28:10] Sara Ecklein: Thankfully, she had enough capacity to sign documents, name me her power of attorney for both finance and healthcare. And I really hit the ground running for a while. I was, we were meeting a minimum of once a week, if not twice a week. Because she was having a full on healthcare crisis on top of like a financial crisis because her bills were unpaid for about eight months.

[00:28:35] Sara Ecklein: And so I was figuring out what’s going on. Where are the assets? What does she have, what are the bills that she actually owes? What can I argue and bring down and remove fees? And then beginning to work with her team. At that point, she had been placed at an assisted living facility.

[00:28:58] Sara Ecklein: At least her day to day, she was now much more safe than going back home. But it required a lot, and I don’t wanna share too much about her. But I was working with a lot of specialists and going back, asking for medical records. Because she really didn’t have anything and couldn’t really remember what was being advised.

[00:29:23] Sara Ecklein: So it was a lot of working alongside her primary care physician who was wonderful and going back and figuring out and putting the pieces together and getting her a formal diagnosis, figuring out a care plan. Also beginning to work and figure out what is her budget, because at that point her income was very low, and her expenses were just very high because of the medical.

[00:29:51] Cathy Curtis: That’s incredible. Just think about how many roles you took on just in this situation.

[00:29:58] Sara Ecklein: Yes. No, it was a lot.

[00:30:01] Cathy Curtis: Yeah, it was a lot. And this person waited for a crisis. The crisis triggered hiring you, right? Is that the case a lot of the time, or do people hire you long before they get to that point?

[00:30:20] Sara Ecklein: Yeah. And really, so for me, I’m a very young private fiduciary, and I would say that really stands out for me. I’m in my mid-thirties and there’s very few professional fiduciaries in their thirties and forties. I believe the average age is actually over 60 for the profession. Don’t quote me on that.

[00:30:41] Cathy Curtis: That sounds, I wouldn’t be surprised. That’s like the financial advisor, independent financial advisor, although that’s changing. There’s a lot more younger people coming in now.

[00:30:53] Sara Ecklein: Yes. Yeah, so I work a lot with clients in the planning phase because of my age. Obviously, someone who’s a seasoned fiduciary in their sixties.

[00:31:04] Sara Ecklein: If there’s an immediate need, they can do a great job. But if someone is planning and doesn’t need a fiduciary in 10, 15, 20 years, that doesn’t really help the client. Someone nearing retirement. So that’s where for my practice, I work a lot with clients in the planning phase. I really love it because you build the relationship long before services are needed.

[00:31:32] Sara Ecklein: And so it’s a slow progression, and I find that’s a wonderful way of getting to know people, building that trust in those situations. Because typically, as much as we can do planning, crises still occur. And these situations and these scenarios, it’s hard to navigate. But it makes it so much easier if you’ve built that relationship over the years versus someone that you’re just meeting now.

[00:31:57] Sara Ecklein: And we’re still able to do it, but that, building that trust and building that relationship can take time. And if you’re losing capacity and losing memory loss and so many things can be lost and that can be hard for anyone to just accept and understand.

[00:32:23] Cathy Curtis: I think denial is a normal part of that process. I see that all the time with my older clients. Nobody wants to admit that they’re losing their memory and people clinging on to things like being able to drive and being able to go out independently and all those, they don’t wanna give it up.

[00:32:39] Sara Ecklein: Yeah, I see that a lot. So it does make it easier to have those conversations when we’ve known each other for a long time.  

[00:32:49] Cathy Curtis: Let me, let’s segue to your business, like business model. This, I’m curious about this. So it, it sounds to me like you probably have several clients that are years away from needing you full-time.

[00:33:07] Cathy Curtis: Meaning you’re the trustee. All that’s triggered. And in the meantime, you’ve onboarded them as a client. You have developed a way to touch base with them periodically, but how are you paid during that time and is that an issue for someone with a business like yours?

[00:33:27] Sara Ecklein: Hasn’t presented an issue for me yet.

[00:33:30] Sara Ecklein: For me, I really charge a one-time flat fee of a thousand dollars to go through my intake process. And that’s going over what we discussed before, reviewing a draft of their documents. Sometimes I need a few edits on my end, and so I’m communicating directly with their attorney on those changes that I would require and if they wanted me to act in the role of trustee, power of attorney agent for healthcare.

[00:33:58] Sara Ecklein: And once we get through that, and the intake forms are complete, and then I follow up with a consultation to go over any questions that I may have, or they may have. And that, so that all covers my intake process. And I’m really essentially creating a file for clients long before they need me. But ongoing, I really don’t charge a fee unless, I just leave it as you can book a consultation with me on an as needed basis.

[00:34:30] Sara Ecklein: And I would just charge my hourly rate. But that’s really, if the client has capacity and they’re doing well, I’m not, I’m not initiating. That’s really coming from them.

[00:34:42] Cathy Curtis: Okay. That makes sense. And tell me again, how long have you been doing this for?

[00:34:46] Sara Ecklein: Yeah, I’ve been doing this work, I started working in the profession in 2014, so I’m approaching about nine years. And I went off on my own about two years ago.

[00:35:02] Cathy Curtis: Congratulations. That must have been an exciting moment.

[00:35:05] Sara Ecklein: Yes, it was. It was all during the pandemic. But yes, I worked for two well established fiduciary agencies before going off on my own and really learning from just, I’ve had amazing mentors along the way. So that has definitely helped me and in my practice.

[00:35:24] Cathy Curtis: And it sounds like there’s an association too you can use for mentorship roles and things like that.

[00:35:32] Sara Ecklein: Yeah. The Professional Fiduciary Association of California, we usually just call it PFA. That’s a wonderful place also just for consumers to go if they’re looking to find a professional fiduciary.

[00:35:45] Sara Ecklein: You can search based on location, and you can also search based on what service you might need specifically.

[00:35:56] Cathy Curtis: That brings up another question. And the pandemic changed a lot of things. For example, I, most of my clients prior to the pandemic were local clients, and I would see them in person periodically through the year.

[00:36:08] Cathy Curtis: Then the pandemic hit, and of course we all switched to Zoom. And I’m doing most of my meetings over Zoom now. And I also found that clients from other states started to contact me and I was able to take on those clients because it’s so easy now to build a relationship over Zoom.

[00:36:30] Cathy Curtis: Everyone’s used to it. In your case, how does that work for you? Do you still mostly work locally, or have you expanded into a broader audience?

[00:36:42] Sara Ecklein: Yeah, for the most part. Most of my clients are in the Bay Area,. So I’m based in Silicon Valley. I do have a pretty big reach, I think, throughout the Bay Area, going all the way from Marin County, Alameda Contra, Costa County.

[00:36:58] Sara Ecklein: I do have a few clients where they do live outta state. But I will preface it, it’s not really the client who’s still living. I’m really interfacing with a beneficiary that lives out of state.

[00:37:12] Cathy Curtis: Okay, so that’s different. And do you still meet most of your clients in person in the beginning of the relationship?

[00:37:19] Sara Ecklein: No. More and more now I’m doing phone and Zoom consultations.

[00:37:24] Cathy Curtis: Okay, so similar.

[00:37:26] Sara Ecklein: Yeah, similar and definitely with clients in the planning phase. That’s, my whole intake process is it’s all virtual and if clients want me to come out and do a home visit, then that’s something that would be an additional kind of fee in charging an hourly rate for me to come out to the house.

[00:37:44] Cathy Curtis: Okay, that makes sense. And can you describe who your ideal client would be? I know we all have an ideal client, the kind of person that we like to work with, that we know we have the expertise to help. And you probably have one too, and that fits your business model and all of those things. Could you describe that person?

[00:38:07] Sara Ecklein: Yeah, so there’s, I have a few. So, you know, one ideal kind of client is really a couple and they’re working in the planning phase. So I love this because they’re already working with a, typically a team of professionals. Typically, they already are working with a financial advisor. They’re already working with an estate planning attorney, and now they’re looking for professional fiduciary.

[00:38:32] Sara Ecklein: So I’m just one more kind of professional to add to their team and supporting them with their planning. I love couples like that because I find that they’re proactive in thinking ahead, and that’s really where I love to serve. I also am building the relationship and I’m more of a, almost like a consultant in a way. Because again, it’s long before they need me. And I find that those relationships just become that much more rewarding and enriching when they’re over the years and getting to know them and oftentimes their family.

[00:39:09] Sara Ecklein: Whoever that may include. And then I also specialize in an area called special needs trust. We haven’t really touched on that much during, during this phone call or interview.

[00:39:20] Sara Ecklein and Cathy discuss special needs trusts and why it can be helpful to have a trustee who specializes in this area.

[00:39:20] Cathy Curtis: Oh yeah, let’s talk about that now. That’s an important area.

[00:39:23] Sara Ecklein: Yeah. Special needs trust. The world of private fiduciaries is already pretty niche, and then it just gets that much smaller when it comes to special needs trusts.

[00:39:36] Sara Ecklein: There’s different types, and I don’t want to go down too much of a rabbit hole into detail. But what it tells me is that this, the beneficiary of the special needs trust is most likely receiving some sort of public benefit and for whatever reason, whether it’s the family or this beneficiary is about to receive money out.

[00:40:01] Sara Ecklein: We’re needing to preserve that public benefit. Either family can establish the special needs trust. This is called a third-party special needs trust. Sometimes there’s something like a medical settlement and the special needs trust will be established with a court order. That’s typically considered a first-party special needs trust.

[00:40:23] Sara Ecklein: But anyways, that’s an area that I do specialize in.

[00:40:27] Cathy Curtis: So when you say specialize, so an attorney sets up the special needs trust, right?

[00:40:33] Sara Ecklein: Yes. And then I would be named as trustee for that trust. Yeah, so I, my background, I managed public benefits for the fiduciary agency I worked at prior. So I did that for about six years and I really was the point person interfacing with Department of Social Services, Social Security Administration, and really advocating to maximize the client’s public benefits.

[00:41:04] Cathy Curtis: That’s an excellent and important niche to be in. And would you, how big a part of your business is that?

[00:41:10] Sara Ecklein: It’s about half at the moment. For my active cases, a lot of clients will be named as the families for the revocable living trust. So Mom and Dad’s Trust and then their trust will eventually fund the special needs trust. And so I’ll also be named in that.

[00:41:33] Sara Ecklein: It’s hard for me to say, but I get a lot of referrals also for families with disabilities because they’re planning that their child will most likely always be receiving some sort of public benefit.

[00:41:47] Cathy Curtis: So you must have built up a reputation as an expert in this area.

[00:41:52] Sara Ecklein: Yes, I think so. It really, with administering a special needs trust, there’s a lot of rules and you really need to have a good understanding of public benefits and the specific public benefits that the beneficiary’s receiving. Because that’s going to directly relate to how you administer that trust.

[00:42:12] Cathy Curtis: And can you give an example of a mistake a person can make if they don’t know all the rules?

[00:42:19] Sara Ecklein: Oh yeah. A lot of times I have taken over from non-professionals, or I’ve also come in and provided like a consultant or like case management services alongside like a family member who’s acting as trustee for a special needs trust.

[00:42:37] Sara Ecklein: Typically, a big no-no is giving cash directly to that beneficiary. Because that cash would count as income, and then that could jeopardize and they could lose their public benefits. So that’s, I’ve seen that happen a lot. Typically, there’s a lot of expenses that you’re not supposed to pay for.

[00:43:00] Sara Ecklein: Again, it’s always gonna depend on the type of public benefits that person’s receiving. But generally speaking, you typically don’t wanna pay for rent and food because those things would be counted, and that’s what like a public benefit, like SSI for example. That’s the, I find the most restrictive benefit.

[00:43:22] Sara Ecklein: And Social Security would actually cut back or even cut off that SSI. And really, when you’re wearing the hat of a trustee for a special needs trust, part of your duty is to make sure that beneficiary is maximizing their public benefits.

[00:43:42] Cathy Curtis: Absolutely. And that must be tough, I’m sure, and this probably happens to you. A trustee of one of those trusts may, or a beneficiary, the beneficiary of one of those trusts may come to you and ask you for money.

[00:43:59] Sara Ecklein: Yeah, a couple times.

[00:44:01] Cathy Curtis: Yes. And that takes a certain skill to handle a situation like that.

[00:44:07] Sara Ecklein: Yes. So I worked and provided case management services as well at the former fiduciary agency. And that really is a tool that I have in my tool belt with acting in the role of trustee. Because it’s working with the client and really building that relationship.

[00:44:26] Sara Ecklein: It’s hard depending on what the disability is. A lot of times I do work with clients that have some mental illness or cognitive impairment or developmental disability. And they really aren’t able to understand ever the rules of a special needs trust. I do try my best to explain, but beginning to support them, and then sometimes working with the team so that we can all reinforce what those rules are, that’s typically what that kind of looks like in those scenarios.

[00:44:56] Cathy Curtis: Very interesting. One, a segue to long-term care insurance. Do you ever recommend that your clients buy that type of insurance.

[00:45:08] Sara Ecklein: I don’t, because I can’t give financial advice.

[00:45:13] Cathy Curtis: So you consider that financial advice, not help?

[00:45:15] Sara Ecklein: Yes, I do. Yes. I will say that working with clients with long-term care insurance, I can see when the, if that’s a need, how it can really be such a benefit.

[00:45:32] Sara Ecklein: I think what’s hard is now finding long-term care insurance that’s really going to give you the coverage you need. That’s hard. I don’t know if you have any long-term care insurance agents, but I would love referrals.

[00:45:45] Cathy Curtis: I do actually. I’ll send those to you. Yeah, I do. It is a very complicated area and changes all the time.

[00:45:53] Sara Ecklein: Yeah. And from my understanding, they’re cutting back and back more and more of what they’re covering and shortening how much the time that they’re willing to pay and the amount they’re willing to pay. And a lot of policies don’t provide or don’t cover home care, but it’s only assisted living.

[00:46:12] Cathy Curtis: Yeah, it’s just like the whole public benefits arena.

[00:46:15] Cathy Curtis: You really have to dig into the details and understand what exactly the person is buying. And it’s their situation or not.

[00:46:25] Sara Ecklein: Yes. So that’s where like typically when clients are coming to me in the planning phase, like that’s their choice of whether or not they want to do that. I find that usually if they’re working with a financial advisor, which most of them are, that person would be making the recommendations.

[00:46:41] Sara Ecklein: And then if a client is using my services, I’m working with a client now and they’re still alive. It’s too late to get long-term care insurance.

[00:46:52] Cathy Curtis: So it’s effort to get it when you’re older and a lot of people don’t qualify anymore. It’s very difficult insurance to get actually. Let me ask you one last question about what you do, and then I wanna ask you about some of these amazing personal things you do.

[00:47:09] Cathy Curtis: So are you required as a private, professional fiduciary to do continuing education? Just for example, I’m a CFP®. We have to do so many CEs per year, and I’m just wondering about that in your profession.

[00:47:24] Sara Ecklein: Yes. Oh yeah, absolutely. For our licensing, it requires, I’m also a member of PFA, the Professional Fiduciary Association of California.

[00:47:35] Sara Ecklein: That also has its requirements. So yes, we do have continuing education and that comes due just like with our license every year.

[00:47:46] Cathy Curtis: Yes. Okay. Very similar to my profession.

[00:47:49] Sara Ecklein: Yeah. And it’s 15 hours a year and it must include two hours of ethics.

[00:47:57] Cathy Curtis: Yes. Okay. We have the same. Sara, is there anything else that you would like to share with our audience about what you do that I have not touched on?

[00:48:08] Sara Ecklein: I feel like we’ve covered a good amount. I would be happy if people are interested in potentially working with me or learning more about my services, you can go directly to my website. It’s trustandhonor.co. That’s dot co. There’s no M at the end. And there’s a contact us page so clients can enter their contact information and their unique situation. And I’m always, I offer a 30-minute complimentary consultation.

[00:48:42] Sara Ecklein: If they’d like to book a consult with me, I’m happy to.

[00:48:46] Cathy Curtis: And I’ll add that to the show notes as well. And then what is the name of the association you mentioned earlier in the call? That’s a good resource.

[00:48:55] Sara Ecklein: Yeah, so PFA, it’s the Professional Fiduciary Association of California. And their website is pfac-pro.org.

[00:49:11] Cathy Curtis: Okay, great. Now what I wanna ask you about, this is really fun fact. You completed the John Muir Trail, 213 miles. That’s amazing. When did you do that?

[00:49:28] Sara Ecklein: I actually did it in college. I had no real backpacking experience. I trained with a few friends for a year. We did several small backpacking trips leading up to it, and it ended up being a 20 day.

[00:49:45] Sara Ecklein: And I, it was wonderful. I’m so glad I did it then because getting away completely unplugged. That’s definitely not possible for me at this point in time.

[00:49:55] Cathy Curtis: Yeah, that would be really hard. Did you do it on your own?

[00:49:57] Sara Ecklein: I did it with a group of five people. Yeah, so it was wonderful. All through the High Sierras of California.

[00:50:05] Sara Ecklein: It was beautiful.

[00:50:07] Cathy Curtis: Did you do, what half dome part of that?

[00:50:10] Sara Ecklein: Half dome wasn’t, but actually hiking up half dome, that was the day trip that I did that inspired the John Muir Trail.

[00:50:21] Cathy Curtis: Okay. Yeah, I’ve done half dome twice. I don’t think I’m gonna do that again.

[00:50:25] Sara Ecklein: Yeah, actually when you’re hiking up to half dome, there’s like a junction that says Mount Whitney and 200 some miles from there.

[00:50:33] Sara Ecklein: And so yeah, we all were joking, oh yeah, let’s do it. And then we ended up doing it the next year.

[00:50:39] Cathy Curtis: Yeah, you ended up sevening. That’s amazing. Very. Okay. And then the other fun fact is that you’re a Tango dancer.

[00:50:48] Sara Ecklein: Yes, I met my husband that way. The Bay Area actually has a very active Tango community, so it, yeah, it’s definitely a love and passion of mine and really being embodied and connected is all part of Tango.

[00:51:07] Sara Ecklein: It’s gone away a little bit. It’s coming back, but Covid really stopped our practice.

[00:51:14] Cathy Curtis: No, that’s such a shame.

[00:51:14] Sara Ecklein: Yes, but it is coming back. I’m actually, I’m expecting, so I’m very pregnant. So at the moment I’m not doing much going out and dancing.

[00:51:26] Cathy Curtis: Oh my gosh. Oh, that’s another fun fact. And what’s great is you have your own business so you can probably take some time off, but work through your pregnancy as well, right?

[00:51:40] Sara Ecklein: Yeah, it’s definitely, I’m grateful to have built the business a few years ago. And I’m in a real sweet spot of being home-based and yeah. I’m still able to work and serve with many clients, and I also have an assistant that will be filling in for me by taking a bit of a leave.

[00:52:06] Cathy Curtis: Great. Sara, this has been a really interesting conversation. Thank you so much for taking the time, and I’ll be sure and put the show notes up, so people know how to get in touch with you.

[00:52:17] Sara Ecklein: Wonderful. Cathy, thank you again for having me. It’s been a pleasure.

[00:52:21] Cathy Curtis: You’re welcome. You take care.

[00:52:23] Cathy Curtis: Same to you.

[00:52:25] Sara Ecklein: Bye now.

[00:52:25] Cathy Curtis: Bye-bye.

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Clean Energy Tax Credits: What to Know Before You Buy

Inflation Reduction Act & Clean Energy Tax Credits

The Inflation Reduction Act introduces several clean energy tax credits and rebates that may benefit environmentally conscious taxpayers.

As a California-based financial advisor who works primarily with women, I frequently have conversations with clients about socially and environmentally responsible investment strategies. But with the recent passage of the Inflation Reduction Act, many environmentally conscious investors are seeking new ways to put their values into action while potentially benefiting financially in the process.

If you’re considering making climate friendly upgrades to your home or vehicles, you may be eligible to claim thousands of dollars in potential tax credits and rebates. However, before purchasing a rooftop solar panel or electric vehicle, it’s important to understand the various clean energy incentives available—and how to use them to your advantage.

Clean Vehicle Credits

The Inflation Reduction Act extends the Clean Vehicle Credit through 2032. It also introduces new credits for purchasing used electric vehicles.

Specifically, if you buy a new electric vehicle (EV), you may be eligible for a tax credit worth up to $7,500. For a used EV, your tax credit may be worth 30% of the purchase price or $4,000, whichever is less. You may also qualify for additional incentives from state and local governments, depending on where you live.  The caveat is that the new credits don’t go into effect until 2023. So, if you’re planning to purchase a used electric vehicle, you’ll likely want to wait until after the new year to maximize your potential tax benefit. 

For new EV purchases, it’s a little more complicated. If you purchase a new EV in 2022, the Inflation Reduction Act stipulates that the final assembly of the vehicle must take place in North America. However, purchases of General Motors and Tesla car models aren’t eligible for a tax credit until 2023.

Car manufacturers must also meet two battery-related requirements for consumers to receive the full credit in 2023 and beyond. That means some EVs won’t immediately qualify for a tax break as manufacturers work to meet these rules.

Lastly, beginning in 2024, car buyers can transfer their tax credit to dealers at the point of sale. That way it directly reduces the purchase price. This can be particularly valuable for two reasons:

  • First, you won’t have to wait until you file your tax return to benefit financially.
  • In addition, transferring the credit to the dealer at the point of sale ensures you’ll receive the full benefit since the credit amount can’t exceed your tax liability. Meaning, if you owe $6,000 in taxes for the 2023 tax year and take the Clean Vehicle Credit worth $7,500, you lose the remaining $1,500.

Keep in mind there are new adjusted gross income (AGI) thresholds to be eligible for a new EV tax credit. In 2023, the AGI limit is $150,000 for single taxpayers and $300,000 for married couples filing jointly.  

Residential Clean Energy Credit

The Residential Energy Efficient Property Credit was previously set to expire at the end of 2023. Now the Residential Clean Energy Credit, the Inflation Reduction Act extends it through 2034 and increases the credit amount, with a percentage phaseout in the final two years.

The Residential Clean Energy Credit is a 30% tax credit that applies to installation of solar panels and other equipment that makes use of renewable energy through 2032. The percentage falls to 26% in 2033 and 22% in 2034.

In addition, the credit is retroactive to the beginning of 2022. That means if you install a solar panel or similar equipment this year, you can qualify for the 30% tax credit on your 2022 tax return.

Energy Efficient Home Improvement Credit

The Inflation Reduction Act also extends the Nonbusiness Energy Property Credit and renames it the Energy Efficient Home Improvement Credit.

This is a 30% tax credit on the cost of eligible home improvements, worth up to $1,200 per year (as opposed to the previous $500 lifetime limit). The annual cap jumps to $2,000 for heat pumps, heat pump water heaters, and biomass stoves and boilers. In addition, roofing will no longer qualify for a tax credit.

Specifically, the annual tax credit limits for qualifying improvements are as follows:

  • $150 for home energy audits
  • $250 for any exterior door (up to $500 total) that meet applicable Energy Star requirements
  • $600 for exterior windows and skylights that meet applicable Energy Star requirements
  • $600 for other energy property, including electric panels and certain related equipment

The enhanced credit is available for projects you complete between January 1, 2023 and December 31, 2033, with some exceptions. Any projects you finish in 2022 aren’t eligible for new incentives. However, if you incur costs in 2022 for a project that you complete in 2023, these costs can count towards your tax break.

Additional Financial Incentives for Investing in Clean Energy  

Finally, the Inflation Reduction Act creates two rebate programs to incentivize clean energy and efficiency projects. Unlike many clean energy tax credits, these rebates are offered at the point of sale. Thus, consumers can reap the financial benefit immediately.

The HOMES rebate is worth up to $8,000 for consumers who make energy efficient upgrades to their homes—for example, HVAC installations. Ultimately, the rebate amount depends on the amount of energy you save and household income.

Meanwhile, the High-Efficiency Electric Home Rebate Program offers taxpayers up to $14,000 for buying energy efficient electrical appliances. This rebate is only available to lower income households, and the rebate amount varies by appliance.

The timeline for these rebates to go into effect is less clear than the three tax credits mentioned above. Many experts believe they won’t be broadly available to taxpayers until the second half of 2023 as the Energy Department issues rules governing the programs.

How to Invest in Clean Energy Strategically

The Inflation Reduction Act creates a variety of financial incentives for taxpayers to invest in clean energy and energy-efficient projects. Those who take advantage of these clean energy tax credits and rebates can potentially save thousands on their taxes while doing their part to fight climate change.

However, to maximize these incentives, it’s important to time them correctly and use their constraints to your advantage. A trusted financial advisor like Curtis Financial Planning can help you incorporate these purchases and investments into your financial plan, so you can reap the greatest benefit. We invite you to connect with us to find out more.

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7 End-of-Year Tax Planning Tips for 2022

End of Year Tax Planning Tips for 2022

With the end of the year fast approaching, Tax Season may be the last thing on your mind. Yet in many ways, the final months of 2022 may be your last chance to reduce this year’s tax liability. To avoid overpaying Uncle Sam and preserve more of your hard-earned income, consider the following end-of-year tax planning tips for 2022.

To minimize your tax liability, consider these end-of-year tax planning tips for 2022:

Tip #1: Identify Changes to Your Tax Situation

In 2022, the standard deduction is $12,950 for single filers and $25,900 for married taxpayers filing jointly. The standard rule of thumb is if you can deduct more than the standard deduction amount in eligible expenses from your taxable income, you should itemize. Otherwise, it’s generally easier and more valuable to take the standard deduction. 

If your income and circumstances have been relatively stable since last year, you likely know already if you plan to itemize or take the standard deduction this year. However, if you’re on the fence, there are end-of-year tax planning strategies you can utilize to reduce your taxable burden.

For instance, consider pre-paying certain deductible expenses—for example, charitable donations or out-of-pocket medical expenses—this year so that itemizing makes more sense.

Let’s say you plan to donate $5,000 to charity each year for the next several years. If you have extra cash on hand this year, you may want to consider donating $10,000 or more to your charity of choice so you can itemize your deductible expenses. Then, next year, you can skip your regular donation and take the standard deduction.

The same is true for out-of-pocket medical expenses. If you know you have certain expenses looming for 2023, you can pay them this year to make the most of the associated tax benefit.

Tip #2: Harvest Capital Losses

Capital gains taxes can eat away at your investment returns over time—specifically in non-qualified investment accounts. Fortunately, the IRS allows investors to offset realized capital gains with realized losses from other investments.

That means you can realize profits on your top-performing investments while selling poor performers to reduce this year’s tax bill. If you have substantial losses, you may be able to completely offset your gains and potentially reduce your taxable income. And in years like 2022 when markets have struggled, you may have more losses than you think.

Keep in mind if you work with a financial advisor, you may not need to initiate this strategy on your own. Most fiduciary financial planners proactively take advantage of tax-loss harvesting to help clients with end-of-year tax planning.

Tip #3: Review Your Charitable Giving Plan

Currently, taxpayers who itemize deductions can give up to 60% of their Adjusted Gross Income (AGI) to public charities, including donor-advised funds, and deduct the amount donated on this year’s tax return.

You can also deduct up to 30% of your AGI for donations of non-cash assets. In addition, you can carry over charitable contributions that exceed these limits in up to five subsequent tax years.

When it comes to end-of-year tax planning, donor-advised funds (DAFs) can provide opportunities to meaningfully reduce your tax liability relative to other giving strategies. For example, if you plan to donate $10,000 each year to your favorite charitable organization, it may be more beneficial to take the standard deduction when you file your taxes.

On the other hand, you can front-load a donation of $50,000 to a donor-advised fund and request that the DAF distribute funds to your chosen charity each year for five years. In year one, you can receive a more favorable tax break by itemizing on your tax return. Meanwhile, you’ll still be meeting your charitable goals each year via the DAF. This strategy can be particularly beneficial in above-average income years.

And better yet, you can donate non-cash assets like highly appreciated stock to a DAF and avoid paying the capital gains tax. This strategy can also help you diversify your investment portfolio without triggering an unpleasant tax bill. Plus, you can take an immediate deduction for the full value of the donation (subject to IRS limits).

Tip #4: Look for Opportunities to Reduce Income

Maxing out your qualified investment account contributions is indeed important for meeting your future financial goals like retirement. However, this can also be a valuable end-of-year tax planning strategy.  

First, be sure to check the contribution limits on your employer-sponsored or self-employed retirement plans for 2022. You can also contribute up to $6,000 to an individual retirement account in 2022 (or $7,000 if you’re age 50 or over).  

In addition, individuals with qualifying high deductible health plans are eligible to contribute to a health savings account (HSA). An HSA can be a great way to save and grow your money on a tax-advantaged basis.

In fact, these accounts offer triple tax savings. Contributions, capital gains, and withdrawals are all tax-free if you use your funds for eligible healthcare expenses. And like qualified retirement accounts, you can deduct your contributions from your taxable income in most cases to reduce your overall tax liability.

Meanwhile, depending on your compensation plan, you may want to consider deferring part of your income to reduce your taxable income in 2022.

Employees with deferred compensation agreements typically pay taxes on the money when they receive it—not as they earn it. That means if your employer pays you a lump sum per your distribution agreement, you could potentially get hit with a hefty tax bill.

There are different ways to structure income from a deferred compensation plan. Your options typically depend on your agreement with your employer. The distribution schedule can usually be found in your plan documents. So, if you haven’t reviewed your plan details recently, you may want to revisit them during end-of-year tax planning to avoid any surprises.

Tip #5: Take Advantage of Lower Income Years and/or Down Markets with a Roth Conversion

The IRS allows individuals to convert a traditional IRA to a Roth IRA via a Roth conversion. A Roth IRA conversion shifts your tax liability to the present. As a result, you avoid paying taxes on withdrawals in the future. In addition, Roth IRAs don’t require minimum distributions.

With a Roth conversion, you pay taxes on the amount you convert at your current ordinary income tax rate. That’s why it can be a particularly powerful end-of-year tax planning strategy in tax years when your income is below average.

At the same time, a down market can be an opportune time to take advantage of a Roth conversion. Since account values typically decline in a negative market environment, so does the amount on which you pay taxes when converting to a Roth. Meanwhile, there’s greater potential for future appreciation and withdrawals that tax-free.

After you convert your traditional IRA to a Roth, any withdrawals you make in retirement will be tax-free. However, you must be over age 59 ½ and satisfy the five-year rule. And since Roth IRAs don’t have RMDs, you can leave your funds to grow tax-free until you need them.

While Roth conversions can be beneficial for many, they don’t make sense for everyone. Be sure to consult with a trusted financial advisor or tax expert before leveraging this strategy.

Tip #6: Strategically Transfer Wealth

If you expect to leave significant wealth to your heirs, proper estate planning is key. Fortunately, there are end-of-year tax planning strategies you can leverage to help minimize your estate’s potential tax burden.  

In many cases, gifting is one of the simplest ways to efficiently transfer wealth while reducing your estate. Each year, the annual gift-tax exclusion allows you to gift a certain amount (up to $16,000 in 2022) to as many people as you like without incurring the federal gift tax. Moreover, spouses can combine the annual exclusion to double the amount they can gift tax-free.  

Indeed, cash gifts are most common. However, you can also use the annual exclusion to transfer personal property or contribute to a 529 college savings plan. Alternatively, the IRS allows you to pay educational and medical expenses on behalf of someone else without incurring federal taxes. However, you must pay the institution directly.   

Trusts can also help you transfer wealth strategically while reducing your family’s taxable burden. However, trusts are varied and complex. It’s important to consult your financial planner or estate planning attorney to determine if a trust may be an appropriate end-of-year tax planning strategy.

Tip #7: Donate Your Required Minimum Distribution (RMD)

To keep people from using retirement accounts to avoid paying taxes, the IRS requires individuals to begin taking minimum distributions from certain qualified accounts once they reach a certain age. As of 2020, required minimum distributions (RMDs) kick in at age 72.

You can withdraw more than your RMD amount in any given year—but be prepared for the potential tax consequences. On the other hand, the IRS imposes a penalty of up to 50% if you fail to take your full RMD before the deadline.

Both scenarios can be costly. Fortunately, careful end-of-year tax planning can help you manage your RMDs to avoid high taxes and other penalties.

For example, if you don’t need the extra income, you can donate your RMD to charity. This is a tax planning strategy called a qualified charitable distribution (QCD). A QCD allows IRA owners to transfer up to $100,000 directly to charity each year.

QCDs can satisfy all or part of your RMD each year, depending on your income needs. You can also donate more than your RMD amount up to the $100,000 limit. And since QCDs are non-taxable, they don’t increase your taxable income like RMDs do.

It’s important to note that the IRS considers the first dollars out of an IRA to be your RMD until you meet your requirement. If you take advantage of this tax planning strategy, be sure to make the QCD before making any other withdrawals from your account.

For More End-of-Year Tax Planning Tips, Consult a Trusted Financial Advisor

This isn’t an exhaustive list of end-of-year tax planning strategies. However, these tips can help you determine if there are opportunities to reduce your taxable burden in 2022.  At the same time, a trusted financial advisor or tax expert can help you identify which strategies are right for you within the context of your overall financial plan.

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S4E5: The Insurance Lady Ruth Stroup Answers Your Biggest Questions About Insurance

The Insurance Lady Answers Your Biggest Questions About Insurance

Your Biggest Questions About Insurance Answered

My guest on today’s episode is Ruth Stroup. Ruth, AKA “The Insurance Lady,” is a Farmer’s agent in Oakland, California. Voted Best of Oakland seven times, The Ruth Stroup Insurance Agency is a community-oriented agency offering customized insurance solutions to businesses and families.

In this episode, Ruth and I discuss all things insurance, from what it covers and doesn’t cover to choosing the right policies and the obstacles that can get in the way of that. Specifically, we talk about wildfire risk in Northern California and how it may cause you to lose your homeowner’s insurance or your premiums to skyrocket. We also discuss what Ruth can and can’t do as an agent to help her clients navigate claims.

Later in the episode, Ruth provides a helpful overview of umbrella insurance, including common misconceptions about what it covers and how to determine if you need additional coverage. She also shares a little-known strategy she uses with her high-earning clients to protect their personal assets.

And be sure to listen to the end, when we talk briefly about earthquake insurance, another potential risk factor for California residents, and many of the common misconceptions surrounding it. Ruth also shares her tips for how she believes people should approach earthquake insurance and how to decide if it’s worth the high premiums.

And lastly, Ruth offers her response to people who believe insurance is just a racket. I learned so much during this conversation and Ruth shared so many great gems that I believe will benefit a lot of you listeners. I hope you enjoy the episode as much as I did.

Episode Highlights

  • [04:02] Ruth Stroup explains what homeowner’s insurance covers and doesn’t cover if someone burglarizes your home.

  • [07:03] How to insure different types of jewelry, whether it’s costume, gems and metals, or fine jewelry.

  • [12:31] What people can do to mitigate the damage if they get burgled or their home is destroyed by fire.

  • [16:22] What to do if your policy goes into non-renewal because you live in a high-risk zone for wildfires.

  • [19:51] How reinsurance companies impact the insurance industry.

  • [22:29] Ruth Stroup shares the reasons besides wildfire danger that a policy may be non-renewed.

  • [26:45] What Ruth can and can’t do as an agent when helping her clients navigate claims.

  • [33:11] Cathy asks Ruth Stroup to give a mini tutorial on liability and umbrella insurance.

  • [38:54] Ruth Stroup shares what she believes is the best kept secret in the insurance business.

  • [42:02] Cathy and Ruth talk earthquake coverage.

Links Relevant to this Episode

Ruth Stroup Insurance Agency’s website

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S4E5 Transcript: The Insurance Lady Answers Your Biggest Questions About Insurance

[00:02:50] Cathy Curtis: Ruth Stroup, thank you so much for being on my podcast, Financial Finesse. I can’t wait to talk to you about all things insurance.

[00:02:56] Ruth Stroup: I’m so glad to be here. Thanks for inviting me, Cathy.

[00:03:00] Cathy Curtis: So, Ruth, as you being an insurance person, and I know being a financial planner, that many times we prepare for one thing and then something different happens. And so we are gonna talk about things like that and what could go wrong.

[00:03:16] Cathy Curtis: And I’m gonna tell a short, personal story that we could start with. So I live up in the Oakland Hills, which is a beautiful woodsy neighborhood. Very quiet, peaceful. And, but the homes are separate from each other, lots of foliage around the homes, et cetera. And what we worry about most up here is fire.

[00:03:40] Cathy Curtis: And, but unfortunately, I was away on vacation recently and our home got burglarized. So of course we had to make a claim. And even though I am a financial advisor and I know a lot about insurance, when it happens to you, you realize that you don’t know everything. And one of those things is what is covered and what isn’t.

Ruth Stroup explains what’s covered and what isn’t covered by homeowner’s insurance if your home is burglarized.

[00:04:02] Cathy Curtis: So I thought maybe you could talk to that a little bit. I know you have a ton of experience in this area. And give our listeners an idea of what they can expect if this happened to them.

[00:04:14] Ruth Stroup: Great, Cathy, that’s such a great question. I find all the time that people think insurance, when we, when it comes to having a claim, we think insurance covers everything.

[00:04:24] Ruth Stroup: And when it comes to purchasing insurance, we’re trying to find all the ways to save money on our insurance. And those two things can be at odds. So when I work with clients, one of the things that’s the most important to me is to find out what matters to them. For example, if someone has a lot of jewelry or fine art or firearms for that matter, if they have things that they collect, they need special insurance for that.

[00:04:52] Ruth Stroup: And nobody really thinks about it because we don’t go out and buy the full collection at one time. We buy once, this birthdays, anniversaries, a special treat, a celebration of some sort. And so collections don’t come to us fully formed. They’re created over time, and we don’t think about how much they’re growing in value because we’re spending our cash flow on them.

[00:05:18] Ruth Stroup: Years ago, I had a client. This was back when I worked as an investment advisor over at Charles Schwab. He was in Castro Valley, he lived on a cul-de-sac. He was the survivor of three or four brothers, sisters, extended family members had passed away. And in his basement he had multiple sets of silver tea service, silver flatware, golf clubs, hobby things, tools. And somebody broke into his house, filled up the car.

[00:05:51] Ruth Stroup: He had parked in the garage with all the items that were in the basement. Drove away with them to sell them for 10 cents on the dollar, whatever else they were gonna do. He lived on a cul-de-sac. The neighbors saw his car come and go multiple times. But because it was his car, they never questioned it.

[00:06:12] Ruth Stroup: And I think, and he was talking about filing for the insurance claim. But in his case, in the world of what can go wrong around theft, which we’re seeing more and more of here in the east bay and in California, in general, all the items he had were sort of family inheritance. And it’s not like they got to be in the centerpiece of the dining room table.

[00:06:34] Ruth Stroup: They were in the basement. So if he had asked me as an insurance agent today, what I would think about insuring those items, I would ask him, did it have sentimental value? Which means I’ll be sad when it’s gone, but I won’t replace it. Or does it have financial value? Which means I’m gonna wanna replace this.

[00:06:56] Ruth Stroup: And when we have a fire, we have much more of a, of our things that we definitely want to replace.

How to insure different types of jewelry, whether it’s costume, gems and metals, or fine jewelry.

[00:07:03] Cathy Curtis: Yeah. Ruth, let me step back a minute. I wanna share my personal story on a collectible, a collection I had before we go into fire. So in my case, and a lot of women do this. I’ve been collecting jewelry for years and I’m not talking fine gold and gem jewelry.

[00:07:20] Cathy Curtis: I’m talking artisanal. Unique pieces that I find when I’m in Europe or on a weekend getaway in Sonoma or Napa or whatever. And I could tell you every piece I had, where I got it, and the story behind it. So I didn’t insure it because each piece was not a lot of value. And I didn’t worry as much about it as my fine jewelry.

[00:07:46] Cathy Curtis: Again, each piece was, every single piece of that collection was stolen. The thieves dumped out my jewelry chest and stole every single earring, bracelet, necklace that I had been collecting over the years. And that hurts. It really does. And I’m not gonna be able to replace it. It was probably worth about $15,000 in total.

[00:08:07] Cathy Curtis: And insurance doesn’t cover that. Cause I didn’t have any of it appraised. It, it wasn’t worth appraising any of it. So that’s a really good example of something you’re talking about. Now, if I had, if you were, if I had come to you and said, can I insure that? I really wanna insure that collection. Could that have been done?

[00:08:24] Ruth Stroup: It can. People don’t really, I, there’s a way I always ask the difference between is it costume jewelry, which is in the under $100. Is it fine jewelry? So $500 to $2,500. Or is it gems and metals? And I know people who insure none of it. I know people who insure all of it. There’s a way to insure them a little bit differently.

[00:08:49] Ruth Stroup: So a collective amount for smaller items and a, an itemized amount for larger amounts. But the jewelry company we work with. If it’s special enough to add it, it’s inexpensive to have, you can either have your most important pieces insured. Or if you collect stuff, you can insure it all. And then, and then you have to, the thing is to get replacement cost and insurance, you have to replace things.

[00:09:18] Ruth Stroup: And the items you have are more of a what’s the market value than what’s the replacement value. Because there are, they are all artisanal. But I see lots of ladies, I say, do you sparkle? And they do. Then I ask if they have special insurance for that. And most don’t, and then nobody knows what it costs.

[00:09:39] Ruth Stroup: So they don’t know what they’re saying. Yes or no to the men and their watches are exactly the same. Got a bonus, buy myself a $10,000 watch. My stocks vest, got myself a $10,000 watch. Had a baby, got myself a $10,000 watch. And over a decade, somebody might have 3, 4, 5 watches because they had occasions to, to mark with the watch.

[00:10:04] Ruth Stroup: Maybe one watch is not such a big deal, but $50,000, a hundred thousand dollars’ worth of watches. Many men have that much in their closet.

[00:10:11] Cathy Curtis: And it, and insurance does not cover watches. Is that correct?

[00:10:15] Ruth Stroup: It treats them as jewelry.

[00:10:17] Cathy Curtis: Yeah. Okay. What about silver sets of silverware? That’s not covered either, unless you have a rider.

[00:10:24] Ruth Stroup: Silver’s different because silver has limits on the policy.

[00:10:30] Ruth Stroup: But in the old days back when the flea market was the thieves market, what people went to buy back was their family silver. There was definitely a market for it. Today, grandma’s silver, every, every millennial’s, worst nightmare to have grandma’s silver delivered to them. To be the caretaker of dusted tarnished silver.

[00:10:58] Cathy Curtis: Oh man. Yeah, my aunt’s, my favorite relative in the whole world. I cannot believe that they took it because I know what you’re saying. You could find it in any consignment store, flea market.

[00:11:15] Ruth Stroup: And you can insure silver collectively without an appraisal.

[00:11:19] Ruth Stroup: It, it just the issue with the theft of silver, silver tableware, where it’s so much less. Your people either, they were either, they know, like when they get that personal on what they take. They’re looking for something or something bigger. That’s very malicious. And I’m so sorry that happened to you.

[00:11:39] Cathy Curtis: Yeah. I know it was strange to think some of the things that they took for.

[00:11:43] Ruth Stroup: Usually what they do is they go through all your drawers and all your closet and all the known, hiding places that people think that thieves don’t know about. And they look for cash, especially cultures that keep cash at home.

[00:11:59] Ruth Stroup: Yeah. They look for things that they can sell easily. So they like shoes and they like, they love handbags. They also like handbags because the handbags can hold stuff as they’re taking things away. Uh, I got broken in two years ago. They used my luggage to steal my stuff. Yeah.

[00:12:18] Cathy Curtis: Yeah, they, I got several bags stolen that were obviously used to carry, cart things.

[00:12:24] Cathy Curtis: But they knew to take my nicest bags though.

[00:12:27] Ruth Stroup: Yeah. These were designer shoppers. Oh my gosh.

What people can do to mitigate the damage if they get burgled or their home is destroyed by fire.

[00:12:31] Cathy Curtis: Oh, given that, let’s, what is some good? You can’t prevent everything, but what, what are a few things people can do to try and mitigate the damage if they do get burgled?

[00:12:44] Ruth Stroup: So in any kind of claim you wanna do almost like a fire drill for your claim.

[00:12:52] Ruth Stroup: And the first question is, would I replace that? So believe it or not, most people have more money in clothes than anything else and most of us could pair our closets down by half. The first thing to say is if the insurance company did not pay me for this, would my life be the same? Like I might be sad.

[00:13:16] Ruth Stroup: but would my, would I change? Would it, would I be able to pay my housing or rent? Would I be able to pay my taxes? Or would I be able to eat the same way I ate? Will I have enough cash reserve for the long term? And I get very existential about things because if your quality of life wouldn’t change, if you don’t have the item and if you would not replace.

[00:13:42] Ruth Stroup: It’s terrible that someone took it, but it doesn’t have any financial value. It only has very high sentimental value, like your silver set from your aunt. And so I tell people that I really focus my insurance dollars on things that I want to replace. Okay, because then it has real financial value.

[00:14:06] Ruth Stroup: So for example, most people’s wedding rings, they would really want to replace. But an inherited wedding ring, hard to know. A wedding ring that has value after a divorce, hard to know.

[00:14:18] Cathy Curtis: Let’s take example, eBikes, which mine was going by the way. So Rob and I love eBikes. And it does enhance the quality of our life in a big way.

[00:14:32] Cathy Curtis: We take road trips with them, et cetera. So those were stolen. We definitely wanna replace those. So that’s a good example. Whereas my leather coat collection, am I gonna miss it? Yes, but am I, do I have to have all those? No, it’s a really good distinction because a lot of the stuff is just material stuff that you’ve collected that is not gonna change your life in any way.

[00:14:58] Cathy Curtis: So I, I think that’s a really excellent way to think about what to insure and to use your dollars wisely when you’re buying insurance. Yeah.

[00:15:06] Ruth Stroup: And I segue then, Cathy, too, people who are having a hard time getting insurance because they live in a location that’s now difficult to insure due to the wildfires we’ve seen over the last five years, since 2017. And with those policies, what should I, my first question to the people is would you rebuild?

[00:15:26] Ruth Stroup: I’ve worked with lots of seniors who are 70+ years old. They don’t wanna build another house. I talked to other people, they’re like, we love where we live. We would absolutely wanna rebuild. And so we set up the insurance based on what they expect the outcome to be. So sometimes I ask people what’s your next house and how soon in the future is it?

[00:15:51] Ruth Stroup: And for somebody who lives, let’s say in a house with a couple of stories worth of stairs and their next house is something with no stairs, potentially in an area with much less fire risk or closer to family or closer to medical, then a fire might only accelerate that move. What you want in a fire insurance policy is replacement cost, but that means you replaced your home.

[00:16:20] Ruth Stroup: You’re not required to rebuild it.

What to do if your insurance policy goes into non-renewal because you live in a high-risk zone for wildfires.

[00:16:22] Cathy Curtis: Okay. Now the insurance world in California has changed a lot because of the fires. So what in, especially in areas like Napa or here in Oakland and other areas, and some people’s insurance policies have been canceled due to that. What do you, what do you do in that case?

[00:16:45] Ruth Stroup: In the insurance business, we call it non-renewal. Canceled is like when I don’t make a payment and then they cancel me midterm.

[00:16:53] Cathy Curtis: Okay. Thank you for correcting me. Non-renewal.

[00:16:55] Ruth Stroup: Super important distinction because of the timeframe. If the insurance company is going, the insurance cycle if a policy is issued.

[00:17:04] Ruth Stroup: The insurance company does an inspection in the first 60 days. And if they find deficits in the property condition, they give you 30 days to remediate that. And at the end of that 30 days, if you don’t show proof of the updates, then the policy will cancel at any time until the next renewal. The only reason the insurance company could cancel coverage is if there is a, is if there’s non-payment. So assuming the payments have been made, then when it comes up to renewal, that’s the only time the insurance company can evaluate the risk and decide if it fits their current profile or not.

[00:17:47] Ruth Stroup: And this will change year by year, carrier by carrier. And it’s con, it creates a lot of confusion and a lot of bad feelings.

[00:18:04] Cathy Curtis: But I brought this up because that is definitely a distinction. So policies cannot be canceled just one day. They say, sorry, we can’t insure you anymore.

[00:18:19] Ruth Stroup: Nope. Insurance companies have to wait till the renewal date, and they must give you 90 days to shop for your new coverage. So if they miss the win, so if this is not taken lightly, insurance companies are, they wanna grow just like any other business. And they have lots of masters. They have to have a certain amount of reserve to be able to issue a new policy.

[00:18:42] Ruth Stroup: And the regulators really watch the insurance company’s capacity to pay claims. And some of the way we get that capacity is we buy insurance on our book of business in the industry. We call this reinsurance, right, that’s a big business. The reinsurance companies for years, they would collect money every year.

[00:19:05] Ruth Stroup: And then once in about 20 years, something really terrible would happen and they’d have a big payout. They’ve had record payouts in four of the last five years, they have changed their criteria. And if an insurance company needs the reinsurance in order to have capacity to pay, we don’t just have to pay by the regulator’s rules.

[00:19:27] Ruth Stroup: Now we don’t have to just pay by trying to run a good business rules, our own internal things. We also have to pay by the rules of the reinsurance. And it’s that number of constituencies that get involved in things that make insurance complex and that make insurance companies sometimes have to change their guidelines more quickly than you might expect.

How reinsurance companies impact the insurance industry.

[00:19:51] Cathy Curtis: So the reinsurance companies are really dictating a lot of what’s going on.

[00:19:56] Ruth Stroup: They have a pretty big impact. But you have to understand that it’s not just, they don’t just pull a lever and say, hey, insurance company, make a change. It’s, we go to them to get capacity. We have to have capacity to pay in order to maintain a certain book of clients.

[00:20:15] Ruth Stroup: The regulators look at the reinsurance companies for years, it was a very profitable business on the idea that you’d pay out big every once in a while. But every once in a while has become every year. And so they’re looking for their, the comp, their clients, the insurance companies to qualify for reinsurance.

[00:20:34] Ruth Stroup: We have to do, we have to do things a little bit differently in terms of our, the big data. And what’s in our book of businesses and we have to pay more for it too.

[00:20:44] Cathy Curtis: Okay. So let’s, let me just give an example. Let’s say in your book of business, whoever does this, I identify five homes in your book of business that are fire, big fire risk.

[00:20:56] Cathy Curtis: And so you notify at the renewal date, you notify the homeowner. These are the things they need to do to mitigate fire danger?

[00:21:09] Ruth Stroup: No, sometimes it’s this location no longer qualifies, hard and fast.

[00:21:13] Cathy Curtis: Ah, okay.

[00:21:14] Ruth Stroup: So in, and it could be a client that just signed up last year. It could be a client who’s been with you for 40 years.

[00:21:21] Ruth Stroup: We don’t get to pick his agents.

[00:21:22] Cathy Curtis: Okay. So then that homeowner by law has 90 days to shop for new coverage.

[00:21:32] Ruth Stroup: Correct. And the marketplace is everchanging and every insurance company has their own data modeling for risk. So you might be with an insurance company that can’t shop for other policies for you.

[00:21:48] Ruth Stroup: So you need to find both a new agent or broker. And a new carrier. And then as well as a new policy, other people you might be with the agent or broker may be able to place you somewhere else within their suite of carriers that they offer. So the shopping experience is different for everybody.

[00:22:07] Cathy Curtis: I’ve had clients experience both of those ways that you’re describing. Okay, so that, and then what is the average rate increase in that case? Is it quite large?

[00:22:19] Ruth Stroup: It, when people are non-renewed due to wildfire risk, the new policy can cost between two, two times to five times more than the current policy.

Ruth Stroup shares the reasons besides wildfire danger that an insurance policy may be non-renewed.

[00:22:29] Cathy Curtis: Okay. Okay. Are there any other reasons besides fire danger that a policy would not be.

[00:22:37] Ruth Stroup: Absolutely. Okay. And unfortunately, and claims is a major reason that insurance companies will non-renew clients. So yeah, some clients like whenever somebody has a potential claim, I’m like, let’s look at this and make sure it’s worth it to file this claim.

[00:22:59] Ruth Stroup: And worth it means things like how much will impact my. And will it impact whether or not I can get insurance with you? And if I’m going to sell my house in the next five years, will it impact the new buyer’s ability to get insurance?

[00:23:16] Cathy Curtis: Oh, that’s really critical. So let’s dig into these a little bit. So do you know, you can tell how much more it will cost on the next renewal date. If they make a claim of so much dollars?

[00:23:32] Ruth Stroup: I have an idea. So every carrier has its formula for rate surcharges. And I get Farmers. We have a surcharge for a claim as well as we have a discount, if your claim’s free. So I tell, my formula for whether or not to consider filing a claim is your current deductible plus your current premium. And if it’s less than that, you shouldn’t file a claim.

[00:24:02] Cathy Curtis: Okay. All right. But that doesn’t sound like it could be, like let’s say your deductible’s $2,500 and your current premium’s $3,000.

[00:24:12] Ruth Stroup: You wouldn’t even consider reporting it until it’s $5,500 or higher there.

[00:24:19] Cathy Curtis: Okay. All right.

[00:24:20] Ruth Stroup: Now, a lot of people, the number one, you know, we’ve talked about theft. We’ve talked a little bit about fire. But the real, most common claim we see in the home insurance industry is water damage. And water damage is one of those things, like what was the source of the water?

[00:24:38] Ruth Stroup: How long was the water damage? How long, was it a slow leak or a burst pipe? There are so many variables in water damage that I invite all my clients to call me if there’s anything going on with water in their house. Because just like that example where I said, even a former owner can impact the insurability of the house.

[00:24:58] Ruth Stroup: It’s those water damage claims. And what happens is someone calls to say, oh, we need to get the house ready for the market. So let’s send it to Oz and get, give it a good fluff and, and a contractor. Will we need to replace his pipes or here’s this old leak? And they tell the owner, who’s usually a retired person downsizing.

[00:25:20] Ruth Stroup: Oh, let’s see if your insurance company will pay for some of this. But oh, it’s wear and tear, old routine maintenance. So the homeowner calls the insurance company. And the insurance company declines the claim, but it’s water. So it’s given a red flag to the next insurance company that there’s a water, a potential water loss at this property because somebody called in and had a concern about water damage.

[00:25:47] Ruth Stroup: And since water damage is the number one cause of loss, some insurance companies won’t even touch a $0 claim.

[00:25:56] Cathy Curtis: Whoa. So I’ve often I know this, that you have to be really thoughtful and careful about when and why you call your insurance company. This is a perfect example.

[00:26:06] Ruth Stroup: And you also have to understand who you’re speaking to at the insurance company.

[00:26:12] Ruth Stroup: So I’m an agent. If somebody calls me and says, hypothetically, how will the policy respond? We can run through all the hypotheticals, but if you have insurance with a company where you call directly into an 800 number all in, they say, let’s have you talk to claims. Every claims call is recorded.

[00:26:32] Cathy Curtis: Okay. So am I right on this, that you as an agent and not just you, even though I know you’re great are an advocate for the client.

What Ruth can and can’t do as an insurance agent when helping her clients navigate claims.

[00:26:45] Ruth Stroup: I’m a navigator. So I can’t tell claims to pay or not to pay. I can’t tell them how much to pay. I can’t do any of that, but. And every carrier has its rules. In my carrier, Farmers, I’m allowed to review hypotheticals with anybody, any time. Will it make, how will the insurance company respond to this set of circumstances?

[00:27:09] Ruth Stroup: And I cannot tell them not to file. Like I sometimes I’m like, I personally think that the insurance company is likely to decline this claim. But the only way you’ll know if it will be declined is if you, it’s up to you. People are regularly asking me in the name of optimizing their insurance. What’s that little magic dollar limit where yes, I absolutely should file a claim.

[00:27:34] Ruth Stroup: What I find is many people think that they won’t file a claim until it’s say, over $50,000. And it might be in their best interest to file a claim for $20,000. And so in this market where insurance rates have become so high, the folks sometimes just give me the highest deductible. But the price difference between the highest deductible and something that’s a little more user friendly may not be very much. So in the sales process, when reviewing the coverage and getting ready to purchase or to renew, I use this formula I call bank the difference.

[00:28:08] Ruth Stroup: And so if there’s a difference in deductible, let’s say between I’m gonna use numbers so I can do the easy math. Between $5,000 and $10,000, right? That’s a $5,000 difference. Now let’s say I save $500 for taking additional $5,000 of risk. It would take me 10 years, $5,000 divided by 500, to bank the difference if I took the savings.

[00:28:39] Ruth Stroup: In the difference of the cost of the insurance policy and put it in the bank every year. It doesn’t in my world. My, I tell people in home insurance, the average claim is about once a decade. So if you can bank the difference in five to, and under five years, absolutely take the higher deductible.

[00:29:00] Ruth Stroup: Five to seven years, maybe seven years or more, consider the lower deductible. Ten years, absolutely. The lower deductible is giving better value. And in car I have a little shorter timeframe, three years for absolutely take the higher, three years where you absolutely take the savings. In about five years where you probably are be, get better value with the lower deductible.

[00:29:28] Cathy Curtis: I love it. That you have all these formulas you use. I’m sure you’ve developed those over the years of being.

[00:29:35] Ruth Stroup: I’m terrible at math. It’s what I call chunky math. It helps me. Describe a concept without getting too technical.

[00:29:44] Cathy Curtis: Yeah. Ruth let’s, I wanna just segue just a tiny bit and just ask you, you’ve been doing this for a long time.

[00:29:50] Cathy Curtis: Just talk a little bit about yourself for a minute.

[00:29:53] Ruth Stroup: Sure. I am 16 years in the business now. My agency is with Farmer’s Insurance. We do Farmer’s Insurance, and then we broker things that Farmer’s doesn’t offer. So that’s one of the reasons why we’ve become such experts in the high fire risk. Because farmers doesn’t offer that.

[00:30:12] Ruth Stroup: So I’m not in a compete situation. This is my third career. I was a cook for a decade. I worked for Charles Schwab for a decade. And now I’ve been doing insurance for longer than anything else. I love it because the insurance is pretty much the same day in and day out. You could think it was boring, but the people are all special and unique and different.

[00:30:36] Ruth Stroup: And I just love all the different people I get to meet when I was at Schwab. We slowly but surely, we’re only serving the more and more affluent. It’s a great American dream to own a home and more people participate in that than might use services like yours, Cathy, like a financial advisor. Because it’s just a more ordinary thing people do.

[00:30:57] Ruth Stroup: So I serve a much broader clientele than I had exposure to at Schwab. Which means that I get to work with a much more diverse clientele and I get to be Oakland-based and really serve this community. We serve the entire state of California, but the lion’s share of our clients are here in Oakland.

[00:31:16] Cathy Curtis: Okay. Well, I wanna make one comment about the insurance thing as far as I’m concerned as a financial advisor. I am an investment advisor, but I’m also a financial planner, and insurance is absolutely the bedrock of any good financial plan. And yes. People, I think people make a mistake thinking it’s boring. When I talk to you about it, it certainly doesn’t seem boring.

[00:31:37] Cathy Curtis: And it is so important to know all the different layers of your insurance policy. And I think people, when they’re talking to their agent, like you, they’re getting the information they need and their questions answered. But then they get the policy, they file it away. They never read it. And they’re not really aware of their coverages until they have to make a claim.

[00:31:57] Cathy Curtis: And maybe not, all of them have good insurance. You called it navigator. So I’ll call it navigator. I like to think of it as an advocate too, but they may not have that.

[00:32:08] Ruth Stroup: So most people, their first insurance, they buy on the internet or an 800 number where they don’t have anybody that advises them.

[00:32:17] Ruth Stroup: And then from watching your own clients that most people, especially if they’re planning and they have goals, their life expands and they have more money and more at stake. And sometimes they also have more in terms of debt because they use debt in order to build their assets, especially if they’re investing in real estate.

[00:32:37] Ruth Stroup: So. We, I regularly see people who have just the bare minimum limits for liability on their car insurance, because they bought it when they had nothing, and they just renew it. And nobody says, hey, what is your job today? What do you earn today? Do you have savings and money in the bank? Do you own real estate?

[00:33:00] Ruth Stroup: And so people will have just the bare minimum limits and not think twice about it because it’s a bill they pay. It’s not a policy they count on.

Cathy asks Ruth Stroup to give a mini tutorial on liability and umbrella insurance.

[00:33:11] Cathy Curtis: Let’s talk liability now that you’ve brought it up. In particular, buying an umbrella policy. Can you do like a mini tutorial on that? Because I have to explain umbrella quite often.

[00:33:22] Ruth Stroup: Sure. So with umbrella we see that the most common misunderstanding about umbrella is that people think it covers gaps in their coverage for their own personal property. And that’s the one thing it doesn’t cover is your personal property. What umbrella does is it provides money for a legal settlement.

[00:33:46] Ruth Stroup: And the attorney that comes with it in the event that you’re sued usually for an injury to a third party, the most common use of the umbrella policy is a car accident. For a business, the most common use for any kind of liability coverage is just a simple slip. And there are, what people don’t realize is that they can host a social gathering in their home or in a restaurant or a rented facility, like a country club or a social hall and their guests.

[00:34:24] Ruth Stroup: Any one guest could have a terrible accident on the way home. And if they had alcohol at your event, you can be added to the number of people who are named in a lawsuit for the person who was injured. That’s big. So the four categories I look at for where your money is to see, do you need more protection for your money?

[00:34:48] Ruth Stroup: So the umbrella insurance impacts, it protects your assets. So the first is anything not in a retirement account. So if you’ve got somebody at a company that’s getting company stock, if you’ve got somebody that’s always saved and has a couple of CDs that, no matter what it is, the non-retirement. Stocks bonds, mutual funds, CDs, bank accounts.

[00:35:12] Ruth Stroup: That’s the first layer of things we wanna make sure we protect.

[00:35:15] Cathy Curtis: That’s all the non-retirement things that I call them. Taxable accounts. They beat people’s brokerage accounts, things like that. Okay.

[00:35:24] Ruth Stroup: And then the next thing that people have no idea about is that their wages could be garnished.

[00:35:29] Ruth Stroup: So you can be fresh outta school, have a big student loan, have a big career in front of you. And maybe you’re making $150,000 a year, but you’re still driving on minimum car limits, like $15,000 per person injured. And if you had an accident that you couldn’t pay for, they could garnish your wages even for as much as a decade.

[00:35:53] Ruth Stroup: And that would change your quality of life forever. So even people who don’t have stuff, if they have wages, they need better coverage. And I really like the umbrella policy for them.

[00:36:04] Cathy Curtis: Okay. Let me clarify something. Are IRAs at risk to judgment, to creditors in California?

[00:36:11] Ruth Stroup: They are not technically, nothing in the retirement suite is technically at risk of creditors.

[00:36:18] Ruth Stroup: How I always look at the OJ Simpson case, civil case. OJ’s money was primarily in the NFL pension, every pension payment could be garnished. Every, like it’s not technically at risk. But if that’s where your money is and you have to pay a settlement, you may end up taking the money out plus taxes, potentially plus a penalty in order to do that.

[00:36:48] Ruth Stroup: So I always round up. And if a person has significant retirement assets, I wanna at least think about them. And then I feel the same way about home.

[00:36:59] Cathy Curtis: It’s up to the judge in some cases, right?

[00:37:01] Ruth Stroup: If they, or they might say the judgment is half a million dollars and you have a hundred thousand in coverage.

[00:37:08] Ruth Stroup: So now you have to figure out where to get the other 400, and you make an arrangement with the, I will liquidate assets and pay a hundred thousand. I will accept wage garnishment for this period of time. I will this or that. And the insurance company wants so much to settle within your policy limits, but you have to give them some tools to be able to do that.

[00:37:33] Cathy Curtis: Is this a really common claim? What percent?

[00:37:37] Ruth Stroup: It’s not a, so this is one of those funny insurance things where it’s, you don’t wanna play the odds. You don’t wanna gamble with it. If you have the assets at risk, you want to have coverage. Because here’s what happens. An attorney in the bay area costs about $500 an hour.

[00:37:57] Ruth Stroup: A $1 million liability policy with the attorney coverage that comes with it costs, depending on what you have to cover, plus or minus $500. So it’s like having an attorney on retainer, right? It’s some of the best, and it’s inexpensive because it’s rarely used. But do you wanna be the poor soul who needs it and doesn’t have it?

[00:38:22] Cathy Curtis: I sure don’t. Now let me ask you this. There are some technical things like you have to have so much in your liability limits on your auto and home before you can add umbrella. Is that correct?

[00:38:35] Ruth Stroup: That’s correct. So one of the reasons umbrella is expensive is because the small things are handled by the underlying policy. The cars, the motorcycles, the boats, the houses, the income, the rental property, the vacation house. All of it needs to have a certain level of coverage.

Ruth Stroup shares what she believes is the best kept secret in the insurance business.

[00:38:54] Ruth Stroup: And it’s normal to, to like to have those coverages. It’s not high coverage. And then for my high earners, I like to add an, I have the opportunity to add an additional $1 million, uninsured/underinsured motorist coverage to their policy. And this is the best kept secret in the insurance business.

[00:39:22] Ruth Stroup: Most of my clients who are going to be in a terrible accident. It’s not going to be their fault. They’re not going to be the one paying. They’re gonna be the party that’s injured. And the person who injures them is likely to have terrible insurance because they’re expensive to insure. They’re a new driver, bad driving record, possibly a DUI record, maybe even uninsured, maybe stolen car they didn’t have a right to drive.

[00:39:53] Ruth Stroup: And your policy can, the uninsured motorist pays when your loss is above the amount of coverage available in that other party’s policy. So if that other policy is only paying $15,000 per person, or maybe the boiler plate policy is paying a hundred thousand per person, but your combination of medical loss wages and lingering effects is more than a million dollars.

[00:40:27] Ruth Stroup: It makes a big difference to have uninsured motorist on your umbrella policy. And it’s very inexpensive and it’s a really good protection for people who have a high income, because it’s that wages piece.

[00:40:43] Cathy Curtis: Yeah. That’s so important. Now, why is this such a secret?

[00:40:44] Ruth Stroup: Because it’s inexpensive. I regularly see policies where the insurance companies sold the client, less uninsured motorists from the regular liability.

[00:40:56] Ruth Stroup: Maybe a lease required 100, 300 limits of liability, the person was trying to control costs or cut a corner. The agent sold them $30,000, $60,000 and the insurance company only has to pay out if your coverage is greater than that, of the party that injured you. So it’s a very inexpensive coverage.

[00:41:19] Ruth Stroup: It’s misunderstood if you’re in a car accident and you’re a pedestrian. A bicyclist. A passenger of any vehicle or a driver of any vehicle. And it’s another driver’s fault. You can use this coverage if their insurance is inadequate for what your needs are.

[00:41:38] Cathy Curtis: Do all carriers offer this option? Do you know?

[00:41:41] Ruth Stroup: It’s required by law to, it’s required by law to offer it. And we have to make, you have you sign a disclosure if you take less than what we give, the way people DocuSign these days that do it blind. They don’t even know they’re being offered less.

[00:41:55] Cathy Curtis: No, it’s true. Thank you. That is an awesome tip, Ruth. Thank you so much for that one.

Cathy and Ruth talk earthquake insurance.

[00:42:02] Cathy Curtis: Let’s talk earthquake insurance. Now, most of the people I think that listen to this podcast are in California. They may not, but everyone knows the risk of earthquake in California. So what could go wrong there?

[00:42:15] Ruth Stroup: Most people don’t buy earthquake insurance. And they don’t realize what their responsibilities might be to their lender.

[00:42:25] Ruth Stroup: And in order to, if their house has severe damage from earthquake coverage, most people also don’t realize that they can shop around for earthquake coverage. That there’s more carriers than the earthquake authority. And lastly, most people think the earthquake authority is part of the California state government and receive funding from the state.

[00:42:46] Ruth Stroup: And they do not. They receive funding from policy holders and insurance companies. And then lastly, many people have the belief that FEMA or some other federal organization will help them after an earthquake loss. And they do not realize how limited those funds are and that they shouldn’t be relying on them.

[00:43:09] Cathy Curtis: Okay. So, what do you advise your clients to do in California?

[00:43:15] Ruth Stroup: There are several profiles of clients who I feel really need to buy earthquake insurance. What we learned during the mortgage crisis back in 2008 to 2010 is many people walked away from a mortgage, took a break and restarted their lives.

[00:43:34] Ruth Stroup: And they did not. If anything, they, they didn’t experience a big financial loss. They may have hurt their credit for a while, but it wasn’t impossible in our agency. The people we see who really care about having an earthquake policy are people who have over a quarter million dollars in home equity. For a lot of people, that’s a down payment the bank would not let them walk away from.

[00:44:06] Ruth Stroup: Their loan, even if the house was severely damaged and uninhabitable, that’s. People, if your income is so high there, you’re not gonna be able to do, to just walk away the way people walked away in the mortgage crisis. Because the people who walked away in the mortgage crisis didn’t have that much skin in the game.

[00:44:24] Ruth Stroup: They like, they may not have had the high paying jobs.

[00:44:29] Cathy Curtis: Well, yeah, they may not have had income. You didn’t have to document income on a lot of those loans that were done in those days.

[00:44:36] Ruth Stroup: But today’s buyers go in and buy a house over a million dollars very often and with 20% down or more. So they start with quite a bit of skin in the game.

[00:44:47] Ruth Stroup: Many of those people to afford their mortgage have a very high income. Too high to be able to justify a quick claim on a property that still owes hundreds of thousands of dollars. The third is a category that has more to do with you and me, Cathy. There are some professions where you could pick up and move and go live somewhere else.

[00:45:11] Ruth Stroup: But if you don’t have good credit, you can’t get a job. So we both work in financial services, and if I hurt my credit rating, because a bankruptcy or a quick claim on a house after an earthquake, I might not be able to be employed. Some people in the federal government have the same issue. So people who need to keep clean and good whose employment requires good credit.

[00:45:37] Ruth Stroup: They absolutely wanna make sure with an earthquake policy that they won’t lose their credit because they had to walk away from a house that was badly damaged in an earthquake. And so those are the three money reasons. And then there’s site specific issues. There’s some houses that the type of construction they are, they’re top.

[00:45:58] Ruth Stroup: And the more top-heavy your house is, the more you need really good retrofitting so your house doesn’t come separate from your foundation. And the more potential you have for damage. So the earthquake carriers set the rates based on the site specific risk, proximity to fault lines, and then the, the configuration of the house and the age of the home.

[00:46:23] Ruth Stroup: If the policy is expensive, the bad news is you probably need it because you’re a higher risk client. Or your property, your location is higher risk. And I have clients who do one of the three following things, they retrofit and skip the insurance. They feel like they’ve done enough site improvement to feel safe and secure.

[00:46:47] Ruth Stroup: And that’s what they, how they wanna spend their money by mitigating risk. Some people buy the insurance and don’t do the retrofit because they have insurance. Some people do both. The majority of people by and large don’t buy earthquake insurance. And the challenge we’re gonna have in the bay area is if we have a serious earthquake, we will have very local, highly localized changes to our economy.

[00:47:16] Ruth Stroup: The bay is one of the largest economies, not just in the country, but in the world. Being prepared for an earthquake is really important.

[00:47:25] Cathy Curtis: Yes. One of the arguments I hear about buying earthquake or not is, oh, the deductible’s so high. It just doesn’t make sense to buy it. What is your response to that?

[00:47:33] Ruth Stroup: I always, whenever anybody says something’s expensive, I always say compared to what? Right?

[00:47:37] Ruth Stroup: And then you could even plan for a high deductible, and people will take money from places they might not ordinarily take money from if they need to pay its deductible. So for example, you won’t be able to get a home equity line. If your home is badly damaged from an earthquake, but you would be able to borrow from cash value, life insurance, maybe take an unexpected 401k loan. Maybe take an actual withdrawal from your, from an IRA account.

[00:48:10] Cathy Curtis: Or a margin loan on your investment portfolio.

[00:48:12] Ruth Stroup: A margin loan on the investments. People will have money from places they didn’t expect. You might get a family loan.

[00:48:18] Ruth Stroup: So the question I have for people who have, let’s say a hundred thousand dollars deductible, is what they still will have up to $700,000 of insurance. After they exceed the deductible, what’s their plan to access a hundred thousand dollars? And the people have money in their house.

[00:48:40] Ruth Stroup: Have good incomes who need to keep good credit. Those people have more access to money than they might realize if they sat down and thought about it. And people like you, Cathy, will be super important to those folks when it’s okay. If I had to come up, if you’re like, what could go wrong? Let’s find out like, where do we have a hundred thousand dollars squirreled away for an emergency?

[00:49:05] Ruth Stroup: Is it a margin loan? Is it a loan against cash value life insurance? Is it a family member? Let’s just assume it’s a not a traditional source.

[00:49:14] Cathy Curtis: Yes. So I, what you’re saying about earthquake, and I agree with you a hundred percent is again, like a lot of things. You look at each person’s situation, financial details, and you determine whether financially it makes sense.

[00:49:30] Cathy Curtis: The risk/reward to buy earthquake or not, basically.

[00:49:34] Ruth Stroup: Well insurance doesn’t have a risk reward, Cathy. It never gets you a reward. It only gets you back to where you were at the time of loss. So we don’t think about it this way. I think about it very simply in terms of what would your life look like if this asset wasn’t contributing to your long-term financial goals?

[00:49:54] Ruth Stroup: And if you’re comfortable not having that, then insurance is less of an issue for you than the next person.

[00:50:03] Cathy Curtis: Yeah. When you’re putting it that way, in the case of a total loss of a house in an earthquake, it’s pretty clear the decision you should make.

[00:50:13] Ruth Stroup: And what people wanna do is they wanna negotiate with the possibility of the risk or the potential loss.

[00:50:22] Ruth Stroup: I have a friend who lives up in Napa and he said his neighbor just bought earthquake insurance the month before the earthquake. Didn’t that guy get lucky. He only had to pay for a month of insurance before you actually got a payout.

[00:50:39] Ruth Stroup: The day people buy the earthquake insurance or any insurance is the day when the thought of loss of the entire asset is a, puts a bigger pit in their stomach than the guaranteed loss of writing a check to the insurance company and maybe never getting that money back.

[00:50:51] Cathy Curtis: Okay. Gosh, Ruth, great info on earthquake. What other, is there anything else that you’d like to add to this podcast thus far?

[00:51:01] Cathy Curtis: Important things that could go wrong? Any gems that you like? You’ve already shared with us a few real gems on insurance. I’ll give you the floor.

[00:51:12] Ruth Stroup: Sure. My, the thing I know the most about insurance is that you have to have a policy in force to be able to make a claim. That’s car insurance, home insurance, life insurance, business insurance.

[00:51:26] Ruth Stroup: So you want to test drive that insurance. And say, how will this benefit me at the time of loss? You’d never base this on return on investment. I think about it a little bit like the way I think about when I go to a casino. Will the money I put in that I spend in this casino provide me enough fun that I won’t be sad that I don’t have that money at the end of the night?

[00:51:55] Ruth Stroup: And so the money I spend on insurance needs to me, give me the confidence that if something happens, I have financial support to solve problems. And so I would say most people underinsure. Most people see insurance at, we hear all the time. People think insurance is just a racket. And I’ve lived a life where I’ve seen large claims fade out and where insurance made a meaningful difference to somebody.

[00:52:26] Ruth Stroup: And that’s been, insurance does its best work when it’s able to make a meaningful difference in your life or the life of your family.

[00:52:39] Cathy Curtis: Okay, Ruth. That’s great. And like I said earlier in the podcast. I really believe that having the right insurance is the bedrock of any good financial plan. And Ruth, you’ve offered an amazing amount of great information.

[00:52:55] Cathy Curtis: Can you share with the listeners where you can be reached and whether you write a blog or any information about you that we could share? And I’ll put it in the show notes.

[00:53:06] Ruth Stroup: Fantastic. So I serve the state of California. Most people reach me with a simple phone call at 510-874-5700. If you Google Ruth and the word Oakland, you will find me.

[00:53:25] Ruth Stroup: I am not hard to find. And on purpose, we are working on a soon-to-be-released newsletter that will be called Tuesday Tidbits. It will be 100 to 250 words of a sort of insurance focused life hack, really focusing on people who are looking to, who are in a growth mindset and wanna make sure that they have the matching protection to their assets as they grow.

[00:53:52] Ruth Stroup: It will answer those simple questions. Do I have to take the insurance with the rental car or is it a waste of money? And then it will also talk about things like creating legacy with life insurance, thinking about, you know, how philanthropic you want to be. What does your, I’m 60 years old. So I think about, I think a lot more about legacy and meaning. But I still think a ton about growth.

[00:54:12] Ruth Stroup: So we’ll have that. And I have a team here that works with me. I spend the majority of my day training my team. And so if you can’t reach me for any reason, I have great people who work with me, and any one of them would be happy to help.

[00:54:29] Cathy Curtis: Okay, Ruth. Thank you again for taking the time to talk with me on my podcast.

[00:54:34] Cathy Curtis: It’s been an invaluable discussion.

[00:54:37] Ruth Stroup: Thanks, Cathy. It was really fun.

[00:54:38] Cathy Curtis: It was fun. I’d love to do it again.

[00:54:42] Ruth Stroup: Okay. Thank you so much. We’ll talk to you.

[00:54:43] Cathy Curtis: All right. Okay. Bye bye.

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How Will Student Loan Forgiveness Affect You?

Student Loan Forgiveness

After months of discussion and debate, President Biden announced on August 24, 2022 that many federal student loan borrowers will be eligible for some type of debt forgiveness. Those who didn’t receive a Pell Grant may be eligible for up to $10,000 in forgiveness. Meanwhile, Pell Grant recipients may see as much as $20,000 of debt forgiven.

President Biden’s student loan forgiveness plan comes as welcome news to many Americans drowning in debt. Yet many—voters and politicians alike—oppose the program.

In fact, many Republican leaders are threatening legal challenges in an effort to block the bill. If this happens, the plan’s future may be in jeopardy.

Nevertheless, borrowers who are eligible for student loan forgiveness should be prepared to take advantage of the program if and when it begins. Here’s what you need to know about Biden’s student loan forgiveness program, including how it works and how it may benefit you.

What’s Included in Biden’s Student Loan Debt Relief Plan?

The Student Loan Debt Relieve plan forgives $10,000 of student loan debt for federal student loan borrowers. In addition, borrows who received a Pell Grant may be eligible for up to $20,000 in student loan forgiveness.

The plan also includes:

  • An additional (and possibly final) extension on federal student loan payments until December 31, 2022
  • A push for borrowers who may be eligible for the Public Service Loan Forgiveness Waiver (PSLF) to apply for the waiver before it expires on October 31, 2022
  • The creation of a new income-driven repayment plan (IDR) that would lower monthly payments and potentially reduce the time period required for loan forgiveness for eligible borrowers.

Who’s Eligible for Student Loan Forgiveness?

To be eligible for forgiveness, borrowers’ income levels must be under $125,000 for single borrowers and $250,000 for married couples and head of household filers. Borrowers may use their 2020 and 2021 tax returns to determine their income. They only need to meet the income requirements in one of these tax years.

In addition, only Federal loans funded by June 30, 2002 are eligible for forgiveness. This includes consolidated debt.

Federal loans for graduate school are also eligible for forgiveness, as are Parent Plus Loans. However, if a parent has more than one Parent Plus Loan for multiple children, they’re only eligible for total forgiveness up to $10,000.

Current students are also eligible for student loan forgiveness if they have debt. But if the student is a dependent of their parents, the parents’ income will determine eligibility for forgiveness.

Lastly, it’s important to emphasize that student loan forgiveness only applies to federal loans. Borrowers who refinanced their student loans with a private lender cannot take advantage of the program.

What Do Borrowers Need to Do?

Some parts of the student loan forgiveness plan will go into effect automatically. For example, many borrowers with IDR plans who have already recertified their income with the US Education Department will be eligible for loan forgiveness automatically.

Meanwhile, other aspects of the plan may require borrowers to take more action. One example applies to borrowers who made payments on their student loans since the start of the Covid-19 pandemic.

Since the government paused federal student loan payments in March 2020, borrowers can request a refund of any payments they made after that date. This makes most sense if a borrower’s loan balance is less than $10,000, and a refund would allow those payments to be forgiven instead.

Is Student Loan Forgiveness Taxable?

Thanks to the American Rescue Plan Act of 2021, most student debt discharged through 2025 will be tax-free—at least at the federal level. At the state level, income tax consequences will vary by state.

Currently, 13 states may treat forgiven student loan debt as taxable income. These states include Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia, and Wisconsin.

The Tax Foundation estimates that borrowers could incur anywhere from $300 to over $1,000 in state taxes, depending on where they live, if they receive the full $10,000 in student loan forgiveness. These figures could double for Pell Grant recipients, since they’re eligible to receive up to $20,000 in student loan forgiveness.

Planning Considerations for Those Who Haven’t Filed a 2021 Tax Return Yet

Indeed, most taxpayers have already filed their 2020 and 2021 tax returns. However, if you filed an extension for your 2021 return, there are a few strategies you may be able to leverage to help you qualify for student loan forgiveness.

  • First, consider contributing to an eligible retirement plan if you haven’t reached your contribution limit yet. This strategy makes sense is the contribution is enough to reduce your AGI to a level that’s eligible for forgiveness.
  • Income thresholds for married couples filing separately are still unclear. However, if the thresholds for single filers apply to married couples filing separately, you may want to see if changing your filing status will help you qualify for forgiveness.

As you consider these strategies, keep in mind that the extension deadline is October 17, 2022.

Student Loan Forgiveness: Next Steps

The forgiveness process will be relatively easy for most borrowers. For example, federal student loan borrowers already have income information on file with the US Department of Education. Thus, those who are eligible are likely to receive forgiveness automatically.

Of course, there are still many unknowns, including how a potential challenge by Republicans will affect student loan forgiveness. In any event, the official application should be available soon. The U.S. Department of Education sent out a notice recently that it could be available as soon as early October, 2022.  In the meantime, eligible borrowers can receive updates from the Department of Education by signing up here.

Lastly, a trusted financial advisor can help you better understand how student loan forgiveness may impact your financial plan. They can also help you identify other strategies to pay down your debt and reach your financial goals.

To learn more about how Curtis Financial Planning helps our clients take control of their finances, please explore our services and client onboarding process.

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Strategic Charitable Giving: How to Make an Impact with Your Donations While Minimizing Your Tax Bill

Strategic Charitable Giving

Americans are some of the most generous people in the world. In 2021, Americans gave over $484 billion to charity, according to Giving USA’s 2021 Annual Report. More impressive is that individuals represent 67% of total giving, giving nearly $327 billion in 2021.

There are many reasons to give to charity, from feeling good to creating a legacy. Yet charitable giving can also be important from a financial planning perspective.

In this article, I’m sharing three charitable giving strategies to help you minimize your year-end tax bill.

Charitable Giving and Your Taxes

First, let’s review how charitable giving impacts your taxes.

Currently, taxpayers who itemize deductions can give up to 60% of their Adjusted Gross Income (AGI) to public charities, including donor-advised funds, and deduct the amount donated on that year’s tax return.

You can also deduct up to 30% of your AGI for donations of non-cash assets. In addition, you can carry over charitable contributions that exceed these limits in up to five subsequent tax years.

You need to know your marginal tax rate to calculate your potential tax savings. Your marginal tax rate is the amount of additional tax you pay for every additional dollar earned as income. So if your marginal tax rate is 28% and you itemize, you’ll save roughly 28 cents for every dollar you give to charity.

How to Make a Bigger Tax Impact With Your Giving

Yes, you can write checks to your favorite charities throughout the year, and while your donations may be generous, this approach to giving isn’t the most tax-efficient. Here are some ways to give that are:

#1: Donor-Advised Funds

One of the most efficient ways individuals can donate to charity is through a donor-advised fund (DAF). A DAF is a registered 501(c)(3) organization that can accept cash donations, appreciated securities, and other non-cash assets.

One of the advantages of a DAF is that you can take a taxable deduction in the year you contribute to it, even if you haven’t decided which charities to support. You can then invest and grow your funds tax-free within your DAF until you decide how to distribute them.

And, even better than donating cash, you can donate non-cash assets like highly appreciated stock to a DAF and avoid paying the capital gains tax. This strategy can also help you diversify your investment portfolio without triggering an unpleasant tax bill. Plus, you can take an immediate deduction for the full value of the donation (subject to IRS limits).

#2: Bunching Charitable Donations

Bunching your charitable donations can be beneficial if your total allowable itemized deductions are just under the standard deduction. In 2022, the standard deduction for single taxpayers is $12,950 and $25,900 for married couples.

Example:

Let’s say you give $3000 a year to charity, and it doesn’t get you over the standard deduction amount. However, you could go over the standard deduction if you “bunched” your charitable contributions into one year. For example, in 2022, if you gave $9000 instead of $3000 you could itemize deductions and save tax dollars. Then, you would skip donating in the next two years and go back to the standard deduction. Then, in the third year, you would donate $9000 again.

The result will be more significant tax savings over multiple-year timeframes.

#3: Qualified Charitable Contributions

If you’re age 72 or older and have a traditional IRA, the IRS requires you to take a minimum distribution (RMD) from your account each year. In most cases, RMDs are taxable at your ordinary income tax rate. There’s also a steep penalty for not taking your RMD before the deadline.

Meanwhile, if you have other sources of income like Social Security benefits and possibly a pension, your RMD can push you into a higher tax bracket. That means you may pay more taxes than you would otherwise, even if you don’t need the extra income.

The good news is you can donate your RMD by making a Qualified Charitable Distribution (QCD). A QCD allows IRA owners to transfer up to $100,000 directly to charity each year and avoid taxation on the amount.

A QCD can satisfy all or part of your RMD, depending on your income needs. You can also donate more than your RMD, so long as you stay below the $100,000 limit. This strategy can be helpful if you want to reduce your IRA balance and RMDs in future years.

It’s important to note that the IRS considers the first dollars from an IRA to be your RMD until you take the total amount. So, make your QCD before you take any other withdrawals from your account if you want to realize the full tax benefit of this charitable giving strategy.

A Trusted Financial Advisor Can Help You Incorporate Charitable Giving Strategies into Your Financial Plan

Of course, this is not a comprehensive list of charitable giving strategies that can help you make a bigger impact with your donations while lowering your tax bill. Other giving and tax planning strategies may be more appropriate depending on your circumstances and goals.

A trusted advisor like Curtis Financial Planning can help you incorporate giving strategies into your financial plan, so you don’t miss out on valuable tax benefits. Please start here to learn more about how we help our clients and the other services we provide.

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S4E4: How to Thrive in the Digital World with Susan Reynolds

Digital Wellbeing with Susan Reynolds

Improving Digital Wellbeing

In this episode, Cathy interviews Susan Reynolds about improving our tech-life balance and digital wellbeing. 

My guest today is Susan Reynolds. As co-founder of the nonprofit organization LookUp, Susan helps young people minimize the negative effects of technology and lead healthier, more balanced lives. She also teaches, speaks, leads workshops, and facilitates panels to educate and empower Gen Z to find and implement their own solutions to the detrimental aspects of social media and digital distraction.

Previously, Susan was an English and social studies teacher and curriculum developer. In addition, she was the first Director of Academic Technology at the Fenn School in Concord, MA. There, she developed a curriculum that focused on harnessing the positive aspects of technology while mitigating the negative ones. She graduated with a BA from Dartmouth College and a Master’s in Education from Tufts University. As a yoga and mindfulness teacher, Susan brings mindful technology to her work with LookUp’s youth leaders and innovators.

In this episode, Susan and I discuss the harmful effects social media and digital technology can have on mental health and wellbeing.

And how she works with youths to help them take advantage of the positive aspects of technology and mitigate the harmful ones. We also talk about why she believes Gen Z is well positioned to be agents of change, which may also be a tailwind for new legislation that regulates digital media—specifically, the California Kids code. Unfortunately, since we recorded this episode, Susan has shared that California Kids is now facing an even bigger uphill battle than she previously believed due to aggressive push back from tech lobbyists.

Lastly, we talk about the influence the Covid-19 pandemic had on our technology habits, as well as the challenges of undoing some of those habits now that we’re returning to pre-pandemic norms. Susan also shares her definition of digital wellbeing and how it differs from mental health advocacy.

I think digital wellbeing is a really important issue that affects everyone in one way or another.

Susan offers a unique perspective on how we can have better relationships with technology at any age. With that, I hope you enjoy my conversation with Susan Reynolds as much as I did. 

Episode Highlights

  • [12:04] Why technology is so addictive and how it’s contributing to our mental health crisis

  • [20:04] How digital wellbeing relates to self-care.

  • [28:33] The pending legislation around digital wellbeing at the state and federal levels.

  • [41:38] Susan Reynolds describes some of the work her nonprofit LookUp.Live is involved with.

  • [47:29] The effect the pandemic has had on technology and social media habits.

  • [50:08] Susan Reynolds shares her vision for the next five years.

  • [57:30] How people can get in touch with Susan Reynolds and become more involved with the digital wellbeing movement.

Links Relevant to this Episode

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S4E4 Transcript: How to Thrive in the Digital World with Susan Reynolds

Cathy Curtis: Susan Reynolds, thanks so much for joining me on my podcast. I’m excited to talk to you about LookUp.Live.

Susan Reynolds: It’s great to be here, and chat to a different audience. Because I’m usually speaking to teachers and students themselves. But I think speaking to those in the workforce, but as well as any parents or people that work with gen z. It’ll be really relevant.

Cathy Curtis: Susan, you’re making such a good point, thank you for bringing that up. So my audience is other financial advisors like me, mostly independent advisors who run their own businesses. And then also, my clientele is mostly women.

Cathy Curtis: And I have to say that a lot of us advisors use social media in a big way, including me. I started using it back in 2008 to market myself, that was important for me because of my age. It wasn’t to connect with my friends necessarily, it was to market myself.

Cathy Curtis: And I have to admit, as I was getting ready for this podcast, I can relate to so many of the things that those kids are talking about. Because I’ve been using social media for so long. So I know my audience is going to have a genuine interest in what you have to say.

Cathy Curtis: So with that, can you tell us a little bit about yourself? How you founded your nonprofit? And I think it was with your mother, is that right?

Susan Reynolds: Yes. So going back quite a while, I was a middle school English and social studies teacher for 20 years. And sort of, I mean I started self-admittedly my age, but I started teaching in 1986, and ended teaching in 2006. So if we look at what happened in the middle there, technology came on the scene. And I had never really known anything about technology, but I was a curriculum developer.

Susan Reynolds: And so when the headmaster said we hired this director of technology, he’s crawling around in the attic, wiring the school, I need a tech plan. And I said okay, what’s a tech plan? He said go talk to Michael. And Michael was the director who was crawling in the attic. He said go on the internet, and I literally said, and this is 1997, what is the internet? He sent me to the internet, and the interesting thing that happened was I actually felt my brain speed up. I felt this change. So I dug into all this research, and the research literally was saying that, was predicting internet addiction. It was predicting the promise in peril in education for youth. So right off the bat.

Cathy Curtis: This was 1997?

Susan Reynolds: 1997.

Cathy Curtis: Okay.

Susan Reynolds: Tapscott wrote a book growing up digital.

Cathy Curtis: Okay.

Susan Reynolds: So right off the bat. I worked with it, I watched the change as technology came on the scene and the distractibility of it. And I would say that really started watching my students use AOLIM. So they were working on a computer, a word processor, writing a paper with the little box in the corner. And kids weren’t doing their homework. So that gives you a framework of the longevity of this.

Susan Reynolds: I ended up leaving teaching. I wrote a young adult novel, I became a yoga teacher, I became very interested in mindfulness. And I noticed that when I had my phone in my hand, I was not mindful, right? So I started digging in, what is going on? Like why can’t I teach yoga and meditate? But then if my phone is around, I’m totally out of focus, not in the present moment. And at the same time, I learned about the mental health crisis on college campuses.

Susan Reynolds: And for whatever reason I’d sort of missed it. And this was in 2014, and there was a sentence from the Stanford provost that said, college students have never been more anxious, depressed, addicted. I mean self-harming, lonely, isolated, I mean this really tragic sentence. And as I began to dig into this, no one was really talking about what it meant to live in the digital age. No one was really talking about the impact of social media in any causative way.

Susan Reynolds: There was correlative data out there, but there wasn’t anything specifically targeting it. It was just noticing patterns. And so I started how I think a lot of people in my field who were working on these issues start. You start talking to teachers, you start talking to parents, and you start talking from an adult perspective, what students, what youth should be doing.

Susan Reynolds: And I went along like that until I started really talking to college students themselves, and what I recognized is their lives on social media are really very different than our lives on social media. And the reason for that is as they’re developing their identity, their digital identity is woven right into who they are, and I’ll give you an example.

Susan Reynolds: A young woman at Princeton, she’s an athlete, she said Susan I’ve had my Instagram since sixth grade. And so if you tell me to put my phone down, I feel like I’m losing a piece of myself, right? Like I’m somewhat invisible, and that was this recognition of wow, adults are trying to solve the problem for youth, but who’s asking youth about their pain points and what their solutions are?

Cathy Curtis: She was a gen z age person, right?

Susan Reynolds: Yes, this was in 2018. I’m trying to think when I started really working on lookup gen z was really kids born after 1997. So 1995-97. So these youth are now out of college, so around 25. But at the time, it was really focused in on college students and high school students. The only reason I focused in on college students first was I felt like at least high school students had some sort of gatekeeper of their technology, whether parents, whether teachers, the structure of school with such that they could be told you can’t have your phone in a classroom, a parent could take a phone away to sleep.

Susan Reynolds: Now this is not across the board, this is not all parents, we are all teachers. But I felt like if students hadn’t had any sort of training or even thought about regulating their own technology. We were seeing at this time a lot of college students weren’t making it out of freshman year. So it wasn’t really common, but boys might play Minecraft and stay up all night and not do their work.

Susan Reynolds: And I heard about boys in that category coming home, not having have made it through the freshman year. Girls on the other hand, and these are very stereotypical but very general. Social media tended to be what captured girls, and so they could stay up too late. I mean, it interfered with sleep, and then we can get into all of the things that can happen on social media. But just the fact that there was this distraction that was very hard to control.

Cathy Curtis: And this is college-age students like you’re saying, they grew up with it. Maybe they had some parental control maybe as teenagers. But then they get to college and there’s no one supervising them. It’s almost like an extension of themselves, and they’re full on into it.

Susan Reynolds: Right.

[12:04] Why technology is so addictive and how it’s contributing to our mental health crisis.

Cathy Curtis: And it is addictive, right? I mean, if there’s research science whatever that says yes this is an addictive behavior.

Susan Reynolds: Well, and it’s an addictive behavior because more and more research has come out of the algorithmic design of it. And this is a big piece of the whole issue around this is tech companies concerned more about profit than the impact on people. And the algorithms being designed by brilliant neuroscientists.

Cathy Curtis: Right.

Susan Reynolds: But it’s just gotten more and more, the algorithms are smarter.

Cathy Curtis: Well yes, and there’s been leaps and bounds made in brain research in the last decade or two as well. And all those firms are appropriating research to create profit.

Susan Reynolds: Absolutely.

Cathy Curtis: I mean, wouldn’t it be great if they could turn the algorithms around where it created a good healthy environment, instead of the environment we’re in? And I’m sure that’s possible too.

Susan Reynolds: There is a call for it. There is. I don’t think a profit-based model, which I think is why regulation is so needed. Because I mean, tech companies well, any company, right? I mean, any public or private company needs to have earnings. And so the problem, there’s that conflict between the business model. And it’s become, some people call it the attention economy, where our attention is actually the commodity.

Cathy Curtis: So yes, and unfortunately us humans are attracted to scary, sensational things more than we are happy, benign things. Look at the evening news, why did they do that? Ten stories about crime and bad things, before they ever get to one good story, there’s a reason for that.

Susan Reynolds: Right, absolutely.

Cathy Curtis: That’s the way our brains work, and how detrimental when it comes to young people who’s they don’t have the maturity level. But I have to say it’s not just young people, I think older people can get just as addicted.

Susan Reynolds: Absolutely. And I think the question, I mean in looking at the mental health crisis, I mean there’s a mental health crisis across the board, so it’s not saying just youth. But the specifics and the statistics of the mental health crisis among college students is really frightening, and it was frightening in 2014, it was frightening in 2018, and now, this was all before the pandemic. So the pandemic just added to an existing problem. But it also raised the awareness around the impact of living in the digital world, and digital overload was not something I needed to explain. Whereas before, I might need to explain what digital overload and digital addiction was.

Cathy Curtis: Right, no, everybody knows that now. When did you start your non-profit then, in what time frame?

Susan Reynolds: So the example I gave you of the young woman who said Susan, our identities are woven into our phone, it isn’t. It isn’t sort of something outside.

Susan Reynolds: And because if you think about all the socialization in the community and everything that teenagers go through to create a network, to create their friends’ groups, peer pressure and their self-esteem all woven into the digital. So that was a big clue to me. And at the same time my mom, Anne Reynolds have been very involved in non-profits in the bay area around education and mental health.

Cathy Curtis: Okay.

Susan Reynolds: And we have many conversations about this, and so when I said I think I have this idea that what I’m doing educating teachers and parents isn’t really what I want to be doing, I want to be working directly with college students. And I went to Dartmouth college, and Dartmouth’s entrepreneurship center, the Magnuson center for entrepreneurship at Dartmouth, they are open to alumni as well as students and faculty.

Susan Reynolds: And so I spent some time there talking about the issue, talking to students at Dartmouth, hearing their pain points of what it was like living in the digital age, as well as framing it around the mental health issues that they saw on campus. And it was then that Jamie Coughlin, he was the director, he said well, we give founders grants, why don’t we give a grant with a specific question around solving this problem.

Susan Reynolds: And so it all sort of came together, and we used human-centered design and design thinking, and actually ran a design-a-thon at Dartmouth, which asks for identifying the problem and creating solutions. And that’s really where it came about that we offered a grant to students who could solve for digital addiction, digital overload to create more tech life balance.

Cathy Curtis: Oh, that’s fascinating.

Susan Reynolds: Yes, really fascinating. And then we reached out to other universities, and we ended up working with university of Arizona and San Diego University, and the universities worked with us, ran this different design, challenges. Had this big plan to bring all the youth together at BlackRock in San Francisco, because I had given a talk there and voila, the pandemic hit. So we did what everybody else did, right? We brought the whole idea of look up to the digital world.

Cathy Curtis: Okay. And now you have a summit in October, right?

Susan Reynolds: Yes. So it was one of these, I mean it’s sort of any career path or any company or decision you make, all these things just lined up. So the pandemic hit, which made our plans to do everything in person impossible. But we could reach a lot more youth being virtual and we could bring experts and sort of what we call adult allies together with the students, to hear their ideas and give suggestions.

Cathy Curtis: Because the positive side of the internet and digital connection.

Susan Reynolds: Absolutely. And there’s this promise in peril and tech life balance, and it’s not all bad, right? I mean, there’s so many positive aspects of social media and living in the digital world. And I think for students themselves, that was a really important point for us to make.

Cathy Curtis: Yes.

Susan Reynolds: We’re not saying it’s bad. But it’s this constant message and task of how do we take advantage of all the positive aspects, and mitigate the negative.

[20:04] How digital wellbeing relates to self-care.

Cathy Curtis: So, it’s kind of like defining what is digital well-being.

Susan Reynolds: Well, I think it’s in multiple arenas if we just take sort of the work environment right now, the virtual work environment. Digital well-being is managing the digital world in a balanced way. And I mean, it can fold over right into self-care, right?

Susan Reynolds: Some people schedule meetings where they have a 15-minute break. And they don’t use that 15-minute break to check up on emails or check their phone. But they get up and they walk outside and do all these things that boost resilience, boost happiness. And actually, in the long run, make you more productive. So that’s an example.

Cathy Curtis: You can turn on your internet. You can tell your phone let me know if I’ve been on here for too long.

Susan Reynolds: Exactly.

Cathy Curtis: There are tools, I want to tell you a little personal anthem here. So I use Instagram, I have a personal account and a business account. I didn’t know there was an upgrade, because I guess I don’t pay that much attention. So I was using the old version of Instagram for a long time. And I noticed the app got kind of funky, it was hard to use. I thought there’s something wrong here, there’s got to be an upgrade. So I upgraded. And I upgraded to this weird new format that you click on something and then you get all these videos all of a sudden.

Cathy Curtis: And I said oh my gosh, this is what everybody’s talking about. The old platform all you saw was who you wanted to see, this new platform you see who and also all these other people and it scrolls and scrolls and scrolls, that’s done on purpose, right?

Susan Reynolds: Oh, absolutely.

Cathy Curtis: And probably the other app didn’t work, because they really wanted you to switch over to the new app, and now I’m wondering is there any way to turn that off and I just found out there is from another Instagram user that’s frustrated by this new interface. So I mean, I’ve personally experienced this, and I found myself watching these videos, just getting entranced by them. Some of them are really funny, and you it’s an addictive thing, there’s no doubt it.

Susan Reynolds: Well, it’s interesting too, because this is where the profit model comes in. So Instagram is miming itself after Tik-Tok. And one of the problems of these videos is they’re getting shorter and shorter and shorter, and so we’re not able to attend to lengthier videos conversations, right? Because the brain gets trained in needing to switch all the time. So that knowledge of what you can do, what?

Cathy Curtis: Do kids read books anymore? I mean, do they have the attention?

Susan Reynolds: It’s really hard, it’s really hard. And then yes, and if you think about everything being online, your textbooks and reading. I mean, one of the common digital well-being tasks is print out a reading and pick up a pencil and take notes on that hard copy, because that physical act increases your comprehension and ability to focus.

Susan Reynolds: So part of digital well-being is knowing these strategies that help with attention and focus and productivity, so that’s one whole side of digital well-being. And then there’s the whole mental health aspect of it, is not just how long you’re on social media or Netflix or whatever is grabbing your attention, that you don’t intend to be grabbed, I think is one way to think about it. But then what you’re actually seeing on Instagram and Tik-Tok and social media.

Susan Reynolds: And I think for youth, the comparative culture is huge. And even thinking about comparing a curated, right? Totally altered photo of a friend, because a celebrity is one thing, but if it’s of a friend. And then if someone just turns around and looks at themselves in the mirror no makeup, right? No curation, that just that feeling is, so youth don’t feel as good about themselves.

Susan Reynolds: Their self-esteem is really severely impacted. And the other piece that’s really very interesting and probably we haven’t heard of before is quantified personality. So quantified popularity and personality. So what you think is you’re popular by how many likes and followers you have, which is going to lead to more comparison culture, right?

Susan Reynolds: And more not feeling good enough, and FOMO and fear of missing out, keeping you on the devices longer. So that all of the things that you would be doing if you weren’t on the device that would make you feel better is not really happening.

Cathy Curtis: Right. And then the influencer culture, which I’m sure a lot of you think that’s easy to get to and it’s not, and it takes tremendous amount of hours online. But everyone’s following those people.

Susan Reynolds: Right. So what’s been interesting for us with, because this is our third year. The first year, we worked specifically in colleges and then we had sort of an open call for solutions from students, and during the pandemic, it was a little different. We still had digital overload and tech life balance as a question, how might we solve for. But we really asked the other questions where how might we solve for social isolation and loneliness.

Susan Reynolds: Because of the pandemic, so much of this was such a big problem, but also digital activism. So more on that positive side of how might we use these devices, and this was really during the whole Black Lives Matter movement and youth were really feeling very empowered. Because you could be a change agent and you didn’t need transportation, you didn’t need funds necessarily.

Susan Reynolds: So really, listening to students and what they saw were the struggles, and then also talking about what they were doing. And I think it’s very interesting if we look at gen z as a group, they’re very committed to social change and political change, and creating solutions for climate change.

Cathy Curtis: In my work, they’re ESG investors, environmental social governance investors almost 100 percent, they really care.

Susan Reynolds: Right. And gen z is really, they’re also growing up in an era where there are a lot of problems to solve. So it’s so many choices, and they really feel committed to do that. And some leaders, because it’s not everybody, but these amazing leaders out there say it’s really not cool if you don’t have a cause. So there’s a positive, it’s always this positive and the negative.

Susan Reynolds: So the new change agents because we’ve really seen is a potential for regulation and legislation. Because when I started this work, people would sort of say oh yes right. Legislation, you’re not going to get in, that’s not possible.

[28:33] The pending legislation around digital wellbeing at the state and federal levels.

Cathy Curtis: Yes. Didn’t Francis Haugen cause a big shift in that? Because I know legislation has been proposed for years, and there’s been some past, but nothing about this issue. But since she testified, it seems like there’s more and more, and there is a bill pending right now. I would love you to talk a little bit about the legislation that’s pending in California and at the federal level.

Susan Reynolds: Yes, absolutely. So what Francis Haugen’s research did, and the research all the way up into that point. There was a lot of correlative data. But there was arguments or disagreement on whether it was really truly causative. Like whether social media was actually causing harms.

Susan Reynolds: Francis’s data because it was research done by Facebook secretly within Facebook. Where they came out and it was a direct causative relation, that a third of teenage girls were suffering from self-esteem issues, and body image issues from Instagram. So there it was, it was directed. And I think the other thing that happened was in the UK, they passed a bill, an appropriate design code, which I can talk about.

Cathy Curtis: Yes.

Susan Reynolds: They passed it in the UK, the arguments from tech companies was always or often number one, it won’t make a change, and number two, it will take away innovation.

Cathy Curtis: Okay.

Susan Reynolds: What happened in the UK was they found that it did not take away innovation.

Cathy Curtis: In what way? What did they mean by that?

Susan Reynolds: So that those regulations and those strict rules around design, would sort of hamper technological process, and would actually hamper the ability to create better platforms for people’s well-being.

Cathy Curtis: Okay.

Susan Reynolds: But in the UK, they actually saw that it increased innovation, and the changes were having an impact. And so Google let’s say would have to change something, the way they designed it for the UK. But it would fold over into the other design aspects.

Susan Reynolds: And one of the big things is, social media let’s say is designed for a 12-year-old the same way it is designed for a 40-year-old. And so if we think about other products and other regulated laws in the U.S or in the world, that’s not the case. And so the call really was to change the way things were designed for children.

Cathy Curtis: Under the age of?

Susan Reynolds: Under the age of 18.

Cathy Curtis: Okay.

Susan Reynolds: It started with under the age of 13, and these bills are calling for under the age of 18 saying they’re still minors. And a lot of it is privacy, children’s privacy. And what they call the dark box of the algorithm, that there’s no transparency, the companies don’t say how these algorithms are working it.

Susan Reynolds: So the baroness diver came to the U.S herself and helped write a California bill, it’s called the California age appropriate design code. Based on the same issues of designing technology that a child would be likely to use. So likely to use, so even though a 12-year-old is not supposed to be using Instagram, because it’s 13 and up, they are. So how might we design these platforms to be safer.

Cathy Curtis: So let me ask, so in the UK, 12 years and under aren’t supposed to be using Instagram?

Susan Reynolds: That’s across the board, social media is 13 and up.

Cathy Curtis: Okay, that’s it.

Susan Reynolds: I mean, that’s the rule, it’s not followed. And it’s becoming increasingly younger and younger, I mean eight and nine-year-old are on Instagram and Snapchat, and they’re not designed for youth brains. So that’s a big piece of this.

Susan Reynolds: So the California age-appropriate design code has made it through the assembly, two committees in the assembly, the assembly floor, and it just passed through the senate judiciary, and is on its way to the senate appropriations, and then the floor. And this was the first time we as LookUp was asked for youth advocates.

Susan Reynolds: So in our third iteration of the work we’re doing with LookUp, we now have a question about advocacy solutions. And some of the student’s advocacy solutions are involved with storytelling and filmmaking and podcasting, to raise awareness and reach forward. But we actually had youth testify in committee, as well as write petitions and get their peers to sign petitions. And recently, so that’s one California bill.

Cathy Curtis: Is that called the kids online safety act or is that different?

Susan Reynolds: So that’s the senate bill, that’s the federal bill.

Cathy Curtis: Okay.

Susan Reynolds: There’s another California one called the social media platform duty to children act. I mean, we walked around calling them 2273 and 2408.

Cathy Curtis: I bet.

Susan Reynolds: But that one’s very different, that one allows parents to sue the companies for the addictive nature of social media.

Cathy Curtis: That is a very serious bill, isn’t it? Will that pass? I just can’t imagine that, but what are the chances.

Susan Reynolds: Well, they both made it all the way through senate judiciary, and now they’re going on to appropriations. I think they’re both going on to appropriations. But the interesting thing about these bills, not in the assembly floor, but in committee, they’ve passed unanimously. And they’re bipartisan bills as well, that’s really exciting.

Cathy Curtis: Authored by both republican and democrats initially, right? Yes.

Susan Reynolds: Absolutely, yes. So it’s not a polarized issue, it’s coming across both parties. The big opponent is the tech companies themselves, because they don’t want this. But from LookUp’s perspective, it’s a whole new arena for us that youth are really powerful.

Cathy Curtis: It must be so exciting, for you, your organization and everyone else involved in this.

Susan Reynolds: Yes, it is.

Cathy Curtis: It must be, because it’s kind of coming to a head in a way.

Susan Reynolds: We think it is, and the idea of California, is if California passes these bills, it just leads the way, not only for other states to pass it, but internationally. Because a lot of countries the European union, Australia, a lot of countries have bills pending. So all it’s going to take is a certain amount, and then the tech companies it’s just going to make sense to just do it across the board.

Cathy Curtis: Right. Going back to the California bill, describe it briefly the main points in that bill. If it passed, what would happen? What would change?

Susan Reynolds: So it would require tech companies to design social media differently.

Cathy Curtis: Okay.

Susan Reynolds: It would, to work on the algorithmic design and explain, to work on taking away some of the addictive nature. Not to save data of youth, not to provide, to keep adults who youth don’t know away from them. So it’s really thinking about the health and safety of children

Cathy Curtis: Okay. So taking an example of a young girl for example, that in this Instagram thing, where their self-esteem gets affected by what they see. Will anything in that bill help that situation? As for in the algorithms or what would happen then?

Susan Reynolds: Well, I think the first thing they would have to do is be transparent about how the algorithms work, and change what youth see. So more body positivity. But also, I mean there’s a whole sexuality piece and sextortion, and the ability for adult predators to contact youth. I can’t tell you how many, particularly young women say they have been propositioned or contacted by men seeking.

Cathy Curtis: If you don’t have a private Instagram account as a woman.

Susan Reynolds: It’s shifting those things and putting pressures on the companies.

Cathy Curtis: Okay, gosh and August 1 is the vote, is that correct?

Susan Reynolds: The appropriation, it might be next Tuesday, for the appropriations.

Cathy Curtis: Could be in August one, yes. Could be August on the articles, but that’s already passed.

Susan Reynolds: Yes. Up until appropriations Cosa, the kids online safety act, that’s the national bill with similar privacy laws. Again, from my perspective, the fun thing was there were 28 senators, so 28 states. What we’ve started to do is build a database of youth in California, trying to figure out what counties they’re in. So that was a piece of it. We as adults learned this whole legislative process, but youth are learning it too. And seeing that it matters and that they can actually make a difference.

Cathy Curtis: And when you say youth, these are your staff [Inaudible 00:37:21.06]

Susan Reynolds: So youth I would say is anywhere from 13 to 25. I think in some situations, an op-ed written by a 16- or 17-year-old is even more desirable. But a 24- or 25-year-old talking about their former self, and talking about the harms to them and mental health issues or other issues that have come up is very powerful.

Cathy Curtis: It is, I’ve watched several of them. I’m really intrigued by this your staff, your executive director is very young, right?

Susan Reynolds: She’s pretty young, she’s in her 30s.

Cathy Curtis: Okay, she looks younger than that, okay. But still, you have an extremely youthful stuff.

[41:38] Susan Reynolds describes some of the work her nonprofit LookUp.Live is involved with.

Susan Reynolds: Absolutely, and that’s really a real mission of ours. My executive director before was a friend, we’ll just say in the baby boomer generation. And what we really see look up is this infrastructure to empower, embolden, support financially and with mentorship their innovations, their advocacy, their campaigns for a healthy and safe digital world. I mean, that’s sort of the framework we really look at. And actually, all of their innovations are advocacy. A lot of, well, when the Netflix documentary the social dilemma came out, we were really lucky to have a contact and partner with them.

Susan Reynolds: So our first as we were mentioning our youth for youth summit, we’re coming up our on our third one in October, was partnered with the social dilemma. And so the social dilemma was one of the, was sort of the precursor to Francis Haugen. It revealed a lot of the harms in a documentary that just in a viral way went all over the world. And in our summit, we had the director, Jeff Orlowski, he was the keynote and he really spoke specifically to the youth, and really talked to them about how important they were to the movement, and how to be a change agent.

Susan Reynolds: So it’s been this constant life events happening that really coincided with what we were doing, and brought us in many ways to the next level, [Inaudible 00:40:02.09]

Cathy Curtis: You’re really focusing on that now.

Susan Reynolds: On the advocacy?

Cathy Curtis: Yes.

Susan Reynolds: I think in the beginning, we had a lot of students from an entrepreneurship standpoint create an app, a digital well-being app. We have moved, it’s very difficult to get a startup like that off the ground, and our programs are.

Cathy Curtis: Nobody would know about that have got off the ground, that were developed?

Susan Reynolds: By us, no. What ends up happening is, so we have had this amazing group of young women at Stanford, they created an app called ASMBL, they created it during the pandemic. It was to be a non-addictive platform for all types of social change agents. So they worked on it, got their MVP, their most viable product out.

Susan Reynolds: And just they were going to Stanford, they were competing tasks. And what ended up happening to two of these young women is they said we have to put ASMBL on the shelf, but they are advocates for the movement. And Chloe Schrager was able to go to class with Barrack Obama. So Barrack Obama came and spoke at Stanford and he really spoke about the digital movement in general, and Chloe was able to sit in a class with him, they chose 10 students.

Susan Reynolds: And so she is still a spokesperson for a safer and healthier digital world. So from an app perspective, I don’t think any have really gotten off the ground. And one of the problems with it as well is there are companies working on these digital well-being platforms, and they’re having a hard time as well, right? Just from again because you’re in that profit model.

Susan Reynolds: So an example of an innovation that’s continuing to grow is a young woman Maddie Freeman interviewed Jeff Orlowski, she made her own 15-minute documentary and tied it to a digital detox program called no-so November, so no social media in November, she’s in Colorado. She started this because she saw so many friends and peers die of suicide, so it’s a very mental health focus. But she has developed this campaign that she is promoting and schools are taking it on.

Susan Reynolds: And she learned very quickly that no so November doesn’t mean no social media November. You could take the whole month off from social media. But she gives tips for different ways to take a break from social media. So that’s an example of yes, it’s using a technical platform in the sense of she’s made a film that’s embedded in a website. So it’s a digital solution to spread the message, but it’s not a specific app.

Cathy Curtis: Right, yes. I can imagine developing an app will be tremendously hard.

Susan Reynolds: Well, and I think the other thing they’re finding is, particularly the students that started during the pandemic, that all of a sudden, these apps aren’t needed as much. Because they were developing them for a need that was occurring because we were living through a pandemic.

[47:29] The effect the pandemic has had on technology and social media habits.

Cathy Curtis: Now that the pandemic is waning a bit, what do you see trends changes happening? I’m sure kids were on social media more over the last few years, right? I mean, it didn’t spike in some tremendous amount, thirty percent usage or something?

Susan Reynolds: Yes, and so the problem is changing that habit, getting back in person, getting back outside. I do think one of the debates has been what do you do about schools? Like do you allow phones in schools, how do you do it? How do you regulate it? And I was just speaking with a school in Massachusetts, who it’s a K through nine school, five through nine, has some boarding students, and they’re actually instituting the yondr pouch, which is way y-o-n-d-r.

Susan Reynolds: Which is a pouch that you put your phone in and it locks it up during the day, and then it unlocks it when you leave school. And I was speaking to another middle school teacher, which is really interesting the way it circles back to teaching middle school. She said Susan that is so draconian, don’t you think that they should be learning to regulate it, and I said not in middle school, no. Because if nobody has their phone, no one has their phone, you’re not missing out on anything. One person has their phone and is checking social media, then the rest of them, you’re missing out.

Susan Reynolds: And I also think one of the reasons this is so powerful is when kids go to camp, they go to camp and there’s no phones, many camps say just absolutely no phones. I asked a group of seventh graders, and have any of you gone to camp without phones, a bunch of them raised their hand and tell me about it, oh so much better, so much less stressful. I had so much more fun with my friends, I had better relationships with my friends, and this is middle school and high school.

Cathy Curtis: Yes, so I believe that.

Susan Reynolds: I mean, we can’t live like that, so the trick of digital well-being so to speak is how do we create an environment enough, so that we don’t lose those in-person activities, right? The things that actually boost our mental health I mean.

[50:08] Susan Reynolds shares her vision for the next five years.

Cathy Curtis: Yes. And you don’t develop those addictive behaviors where you don’t even want to talk to your parents at night because you have to be on your phone, I’m sure that happens in a lot of families, very painful. So well, a lot of what you’re saying is very positive. What do you see, I mean as far as the work being done. What do you see, like what’s your vision for the next five years, and what could change and happen?

Susan Reynolds: Well, someone had said what’s your vision for LookUp? I mean it’s not very realistic, one of them is that they don’t need us anymore, right? I mean, I think it’s growing a movement, and allowing more youth, when I say youth, really we work with 18 to 25. High school is just more difficult, because under 18 requires different types of parental permission. And so we’re working, actually we are, youth catalyst is another nonprofit in Oakland, and seven of their youth from actually seven bay area high schools have an internship with us, and they are our marketing company. Are the marketing firm so to speak for the youth for youth summit, that this will be October 15.

Susan Reynolds: And the youth for youth summit is a great way for adults to see what youth are doing, because it’s all run by youth, moderated by youth, youth panels. And it’s really exciting to hear what they’re doing around advocacy, their solutions for mental health. And so one of the things that’s really new that we’re doing this year is we’re bringing in speakers, these amazing sort of awarded mental health advocates in high school and college, to have them discuss the mental health issue, introduce the concept of digital well-being in the digital age, to this group of youth, bringing in that perspective.

Susan Reynolds: Because mental health advocacy has been around longer than digital well-being advocacy, or just because. And so what can these youth learn? What can our youth who are just beginning this advocacy work, particularly when we think about legislation. What can they learn from the mental health advocates? So as we move forward, I keep coming back to my original concern, right? The mental health crisis among college students.

Susan Reynolds: The only reason I say college students and not middle school and high school students, is that’s a population that we can work with in providing solutions and innovations. And they are the biggest speakers for high school students.

Cathy Curtis: Okay.

Susan Reynolds: Sort of this trickle down the peer mentor, right? Just a couple years younger is easier to listen to than someone much older.

Cathy Curtis: Yes, that makes so much sense to me. So how do you define the mental health crisis with college students, talk about that just a little bit.

Susan Reynolds: So it was interesting. I was just listening earlier today to a webinar by Laurie Santos, Professor Laurie Santos who has the happiness lab, that some of you may have heard of, she’s out of Yale. I hadn’t heard statistics recently. But the concern is that, many colleges, I mean over 50 percent, I didn’t write down her current statistics, feel stressed and overwhelmed. Many feel depressed and anxious so much that they can’t get up and do their work.

Susan Reynolds: One in 10 college students has contemplated suicide. So there’s just a trend of having a really hard time in day-to-day life. And so Laurie’s came from college students from schools like Yale, but it’s not specific to high-powered universities, it’s pretty much across the board. So this sort of lack of hope, and I do find in working with students who are working on a problem, they are more hopeful. But all of the self-care processes of exercise, right? Spending time face to face with friends without devices, spending time in nature, right? All of these things that we know we’re good for us, they’re really good for us.

Susan Reynolds: And so youth and adults who spend time on technology, we sort of like we still have this human body. We still have the ancient brain, we still need people. We still need our tribe, we still need our in-person community. And keeping that alive for the next generations and providing that is just so important to being a human being. Because interestingly enough, our brains have not really changed. We still live in, with the sympathetic nervous system and a parasympathetic nervous system, and our sympathetic nervous system goes into fight, flight or freeze. Technology creates fight, flight or freeze.

Cathy Curtis: Well, what you just said was so beautiful. I think that’s a good time to end our podcast, that statement about how to live life with friends, nature, giving attention to things that make you feel good is so important.

Susan Reynolds: Yes, it’s so important. And so people who say what do I do first? I said well, I just call it the three S’s. Can you study without your phone? Can you sleep without your phone? And can you socialize without your phone and try one. Like the sleeping without your phone just changes everything, especially for kids.

[57:30] How people can get in touch with Susan Reynolds and become more involved with the digital wellness movement.

Cathy Curtis: Yes, that’s good. The three S’s. I like that, perfect. Share with the audience, well, how can we as adults help your advocacy in this movement for digital wellness.

Susan Reynolds: Well, I mean, right here with this group, I mean mentorship for, because each team that gets a grant from us, we provide them with a mentor. And it’s interesting, one of our mentors is a life coach, and it’s been really helpful for her to help them prioritize, they are working on an advocacy campaign, and organizing youth that are interested in working with them. Different types of financial support, project management support. So mentorship is just a one-on-one.

Cathy Curtis: Okay. So tell us how that would work, what would someone need to do to become a mentor?

Susan Reynolds: So they would just reach out to me, Susan@LookUp.Live. I mean, we have a newsletter. Our website is LookUp.Live, which was interesting when you’re getting a website, I mean LookUp is the white pages and the yellow pages, right? So it was hard to get a URL for that. But it really sort of is Look Up and live your life. I mean, it’s the first step of looking up from your phone or your device, or your technology.

Cathy Curtis: Okay, excellent.

Susan Reynolds: And I think the other, we have been really lucky in getting grants from some family foundations.

Cathy Curtis: When you say lucky, I bet it’s not all luck. I bet it’s not all luck, I’m sure you write a really good proposal with really good reasons why you should have grant money.

Susan Reynolds: Well, I mean, we got a grant for advocacy and it just coincided beautifully that we could articulate a real need for it, because of these bills in California. But introductions in knowing organizations that give out grants for youth mental health. The digital piece is new, but it coincides so beautifully with any organizations that support youth, underserved youth just example of providing internships for high school students in the bay area from under-resourced schools.

Cathy Curtis: Right. And then the summit, talk about how you can attend the summit.

Susan Reynolds: So I believe the registration link is live on our website, it’s the Y for Y summit, and it is on October 15th. And it’s a great event that you can come to for one panel or you can hang out all day.

Cathy Curtis: Okay. Do you ever think you’ll go back to live, have you talked about that?

Susan Reynolds: The summit, probably not. But we did have an event in June where we brought five of our leaders together in the bay area, to meet other advocates. And then they spent the day lobbying in Sacramento together, meeting with different senators. So face-to-face is the best, I mean it’s absolutely the best. And so working on more local regional meetups.

Susan Reynolds: It’s amazing though when you bring youth together virtually, and it doesn’t cost any money. I mean, probably across the board for companies finding the profit margin, right? I mean, a virtual versus in person, because if you think about it, we flew five youth to the bay area. We had two others who lived here, but flew them to the bay area and housed them, and so really figuring out how to create more in-person events and locally.

Cathy Curtis: You mentioned BlackRock, were they going to sponsor?

Susan Reynolds: They were going to sponsor our collaborative summit. Yes, you’re right, that’s another example that we, I gave a talk to the women of BlackRock organization, and her name is Diana Angelini.

Susan Reynolds: She invited women from other companies, and I spoke in, they have a, BlackRock in San Francisco and maybe in New York too has as a floor that is like a WeWork. And so it was a perfect collaborative space to bring youth together with mentors, and have them share their ideas. So that’s another great, right? Providing a meeting space.

Cathy Curtis: Yes, I know that space in San Francisco, that’s a great space. Good for them for sponsoring.

Susan Reynolds: I know, unfortunately, the date was April 2020.

Cathy Curtis: Oh dear, well, maybe next year, right?

Susan Reynolds: Absolutely.

Cathy Curtis: We don’t know, we still don’t know when this thing’s going to stop.

Susan Reynolds: Exactly.

Cathy Curtis: It really would be nice to have a live event, considering what you do.

Susan Reynolds: Very much so.

Cathy Curtis: Well Susan, thank you so much. Fascinating topic, and thank you for what you’re doing. I know my listeners are going to just enjoy this so much, and hopefully, sign up for the summit or somehow otherwise get involved.

Susan Reynolds: Yes. And if you have a 16- to 25-year-old that’s really fascinated with this topic, we would love for them to join. I mean, and our grant applications will be up soon and so there’s a lot of ways to get involved.

Cathy Curtis: Okay. Now what does that mean to join for our youth?

Susan Reynolds: So coming to the youth for youth summit, definitely. And we will be opening the 2023 applications to come up with solutions, we’ll be opening that up in September.

Cathy Curtis: Okay, good to know.

Susan Reynolds: And we are also building an advocacy branch that’ll be on the website probably in the next month, to create a database of youth who say I want to participate in the advocacy, I’ll write a letter to my senator, I’ll sign a petition. I want to do a little thing, maybe not a big thing, to be part of that.

Susan Reynolds: And the other thing we’re adding is community service hours for high school students, any work done with Look Up. So there’s another avenue as well.

Cathy Curtis: Perfect. By the way, I was on your website and there was a pop-up to contact your senator, you could fill out a form to contact your senator about this coming up bill in California. So that’s another way.

Susan Reynolds: Yes, that’s another way, absolutely.

Cathy Curtis: Yes, okay great. All right Susan, I could talk to you all day about this, we had a lot of things, but hopefully we got the message across odd and clear about what you do, and frame the problem and hopefully solutions will come.

Susan Reynolds: Absolutely.

Cathy Curtis: Yes. Okay, have a good.

Susan Reynolds: Okay, you too.

Cathy Curtis: All right, bye.

Susan Reynolds: Bye.

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