From One Generation to the Next: A MEDIQUS Client Case Study

Ronald J. Paprocki, JD, CFP®

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MEDIQUS Asset Advisors is well known for providing financial services to medical groups and nonprofits.

But, we also are experts in guiding individual physicians – and their families – toward their personal financial goals.

This is the story of our long-term engagement with one doctor and how that relationship became multi-generational.*

The clients

We first met this physician – let’s call him Dr. Smith – at a lecture we sponsored years ago.

At the time, Dr. Smith was practicing medicine in a small-town clinic. His wife stayed busy caring for – and trying to keep up with – four bright, active children (including one with special needs).

After the Smith children were grown, Dr. Smith “retired” from his practice…and promptly went to work for another medical entity!

It was during this time that he thought, “It couldn’t hurt to get an expert ‘second opinion’ on what we’re doing financially.”

He remembered MEDIQUS from the presentation he’d previously attended and set up an appointment.

What we discovered

In our consultations with Dr. Smith, we saw several areas where MEDIQUS could offer expertise:

  • Investing. We found that Dr. Smith and his wife were extremely thrifty – a fact evidenced by their modest lifestyle (and especially the older model car Dr. Smith proudly drove around town). 

The Smiths were also diligent savers. Among other assets, they had accumulated a significant sum of money in traditional IRAs.

We further learned that Dr. Smith dabbled in investing – albeit in a rather speculative way. (He was continually trying to find and invest in “the next big thing.”) Even though these investments didn’t involve large sums of money, it was clear that Dr. Smith fretted excessively over these ventures.  

  • Retirement. Dr. Smith’s well-funded IRAs were a point of concern. Because traditional IRAs are tax-deferred, they’re attractive to younger professionals since the amounts one contributes are deducted from taxable income. However, when distributions are eventually taken from the account (whether by the IRA owner or his/her heirs), they are taxed as ordinary income (which is taxed at higher rates than capital gains). Without a change, either the Smiths (in retirement) or their adult children (via inheritance) would eventually owe a considerable amount of taxes on that sizable sum of money.**
  • Estate planning. In time, the Smiths began to ponder how they wanted their wealth distributed. During this process, they realized they hadn’t thought in detail about “How will our passing affect our child with special needs? What kind of estate plan will best provide for all our children?”

How we helped

Addressing these issues one at a time is how we forged a relationship that ultimately included the entire Smith family. 

Here’s what we did in each area… 

  • Investments. Early on, we showed Dr. Smith some basic performance data on his aggressive investments. “You invested in these stocks because you felt sure they would produce big, quick gains. Let’s see how they did.”

Dr. Smith immediately saw that his investment approach had resulted in minimal returns and maximum stress. He agreed he was ready for a more disciplined, less reactive approach to investing.

We proposed a plan built on data, not hunches. He agreed that was a smarter recipe for long-term investment success: a sound strategy + faith in the strategy + discipline and patience.

Sure enough, this approach resulted in more peace and less anxiety for the Smiths. 

  • Retirement. We helped the Smiths address the looming tax issue of their traditional IRAs. By doing some “Roth conversions” (i.e., moving money from their traditional IRA accounts into Roth IRAs), it meant that the Smiths had to go ahead and pay taxes on that money.*** 

However, this move eliminated future taxes–whether the money would eventually be taken as distributions by Dr. and Mrs. Smith during retirement or inherited by their adult children upon the Smiths’ death.

  • Estate planning. Next, estate planning became a major focus. We worked with the Smiths to create an estate plan that would alleviate their long-term concerns–especially those related to their child with special needs.

In effect, MEDIQUS acted as quarterback during this estate planning process. We recommended an attorney who specializes in estate law and asset protection. We got all the children involved. Together we began to explore various options. We brought in a CPA to carefully look at all the Smiths’ investments and their tax implications.

In the end, the Smiths created a trust that would benefit all their children and not disqualify their special needs child from access to other federal programs that provided needed benefits.**** 

Addressing all these issues highlighted how a person’s (or couple’s) financial plan affects multiple parties. 

Later, after  Dr. Smith passed away, we continued working with Mrs. Smith. It was during this time that we also began working even more closely with the adult children. 

When she passed away, we continued advising the second generation of the Smith family. Initially, this included handling certain estate details. In time, it involved helping the children with their own financial plans (i.e., providing investment consulting and reviewing their tax issues) in much the same way we had helped their parents.

It’s about relationships.

At MEDIQUS, our mission is to help clients develop individualized financial solutions that will appropriately balance risks and returns and enable them to reach their goals.

A piece of this highly relational approach involves “learning” the personalities of those with whom we work.

For example, Dr. Smith was smart, thoughtful, and incredibly curious. He always wanted to know his options, the pros and cons of each one, and the “whys” behind any recommendations we made. His wife, meanwhile, was agreeable and easy-going.

When Dr. Smith passed away, his adult children – all very successful – became more involved. Naturally, they were inquisitive of us and protective of their mother. As we worked with them, we discovered one’s personality was, “Just give me the bottom line!” while another’s mindset was, “Show me all the details and data!” 

As time passed, trust grew. Eventually, the two questions we heard most often were:  “What do you think about this?” and “What do you recommend?” 

Questions like these are a great indicator of a strong partnership between someone and their advisor.

In short, our work with Dr. Smith and his family resulted in:

  • Less anxiety and stress for Dr. Smith after we helped him establish a sound, more disciplined investment strategy
  • More peace of mind for Dr. and Mrs. Smith once their estate plan was in place and they realized both they and their children would be okay financially
  • No confusion or surprises regarding future plans thanks to the atmosphere of careful communication we worked to create with all
  • No awkward family tension because all the necessary family members were involved in all the necessary conversations – via phone calls and even a few in-person meetings (despite the adult children living in different parts of the country)
  • The Smith children creating financial plans they feel good about

It’s always gratifying to work with a family and help them achieve their goals. 

It’s especially rewarding to get to work with two generations of the same family… and help them – through healthy communication and careful planning – avoid the common disconnects and problems that often occur between generations when it comes to finances.

How can we help you?

Perhaps, like the Smiths, you’re thinking “It couldn’t hurt to get an expert ‘second opinion’ on what we’re doing financially.” 

If so, reach out to our team at MEDIQUS. 

Simply click here, fill out the short form, and we’ll be in touch right away. Or call 800-883-8555 and speak to an advisor.

Highlight “Call Out” Section:

Four tips for estate planning:

  1. Be intentional and proactive with your planning. Agree upon a definite time to begin this important process. 
  2. Try to involve all appropriate family members so that everyone remains informed and no one is surprised down the road.
  3. Take into account the unique personalities of family members and structure conversations accordingly. 
  4. Recognize the need for boundaries regarding the types of information you share. It’s good to explain how your estate plan will work. It may be counterproductive to divulge all the assets that are part of the estate plan.

*This story is for illustrative purposes only; this case study is not a guarantee or indicator of future results, and results will defer substantially.

**Ordinary income tax rates apply to money earned from sources like wages and interest – with higher tax rates applied to higher income levels. Capital gain tax rates apply to profits realized from the sale of investments like stocks or assets like real estate, with lower rates for assets held for longer periods. This typically results in reduced tax liability.

***Traditional IRAs and Roth IRAs differ in these important ways: 1. Traditional IRAs offer tax deductions on contributions now, but you pay taxes at ordinary income rates when you withdraw money, subject to certain requirements. 2. Roth IRAs provide no immediate tax deduction, but withdrawals in retirement are tax-free. 3. Traditional IRAs have mandatory minimum withdrawals (RMDs) starting the year one reaches age 72, while Roth IRAs have no RMDs during the owner’s lifetime. You can find more information here.

****Most government programs have rules about how much money a person can have and still be eligible for federal assistance. If you have too much, you can lose your eligibility and benefits. The result is that you will have to pay for things like medical care out-of-pocket. Having the guidance of an expert advisor can help you avoid such situations.

This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact MEDIQUS Asset Advisors, Inc. or consult with the professional advisor of their choosing.

[DISCLAIMER: MEDIQUS is not a CPA and is not providing tax advice. You should speak with your CPA or tax preparer about your specific tax needs.]

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