Home Affordability | Market Leadership

STARTER HOMES AND EXPECTATIONS: The first step in home ownership used to be a “starter home.” But the trend in real estate is more square footage, vaulted ceilings, and walk-in everything. Somehow prices and expectations were supersized. A helpful perspective from Morgan Housel here.

WHEN YOU’RE EXPECTING—INHERITANCE EDITION: Inheritances are complex. Often a constant barrage of emotions, paperwork, waiting, and legalese. At some point, you’ll have to start making decisions. Here’s a brief guide to understand next steps. Inheritances commonly fall into a combination of four broad categories. Each with unique tax implications and options for the beneficiaries:

Bank accounts, Real Estate, or Crypto

• Beneficiaries receive a stepped-up cost basis based on value as of the date of death.
• Beneficiaries have the control and flexibility. They can hold, sell, or reinvest proceeds based on their preferences.
• Best practice: consider getting appraisals on any real estate.

Roth IRA and Roth 401ks

• Often considered a tax-efficient way to inherit money because distributions are generally income tax free.
• IRS’s “10 Year Rule” applies. Funds must be distributed in the 10 years following the owner’s death.
• Proceeds are transferred to a new account called a Beneficiary Roth. Funds can be invested based on the risk tolerance of the new owner.
• Best practice: review the investment allocation to ensure it is aligned with the beneficiary’s needs.

Traditional IRAs and 401ks

• Every dollar withdrawn counts as ordinary income for federal tax purposes.  Depending on where you live, your state may also tax these distributions. For example, Pennsylvania does not impose state income tax on retirement account distributions, while New Jersey and Delaware do. You should consult with your tax advisor regarding your particular state.
• Accounts are subject to the IRS’s “10 Year Rule” and need to be depleted in the 10 years following the owner’s death.
• Proceeds are transferred to a new account called a Beneficiary IRA. Funds can be invested based on the risk tolerance of the new owner.
• Best practice: beneficiaries can work with a financial planner to establish the timing and strategy, and optimize tax efficiency. Overcommunicate with your CPA to avoid tax surprises from these distributions.

Life Insurance Proceeds

• Often some of the earliest or fastest money to be distributed to named beneficiaries.
• Proceeds are generally income-tax-free.
• Beneficiaries can use the money based on their own preferences and needs. Common uses: pay off debts, reinvest, fund partial Roth conversions, gift to charities, spend on travel, remodel/additions, fund education expenses, invest in real estate.

BUT DID YOU NOTICE?: Sure, the news and headlines are dominated by AI, tech, and the MAG7—but have you noticed how small caps and emerging markets have recently contributed to a diversified portfolio?

COMPASS ION DISH: If dumplings could be life-changing, these would be it—fresh, made by hand. Din Tai Fung is a family-owned business that started in Taipei, Taiwan. While primarily out west in the U.S., they’ve opened two locations in NYC. If you find yourself near one in your summer travels, make a reservation—they are very popular! — A recommendation from Erin Radano, Director of Client Services.

*The views expressed represent the opinions of Compass Ion Advisors, LLC, as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, an investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website here. Past performance is not a guarantee of future results.