Municipal bonds have two things going for them: non-taxable returns and their stability as an investment vehicle. But when your bond isn't earning very much, those tax benefits dwindle quickly.

Bond yields usually top out at around 5%. As of April of 2024, the a 30-year treasury bond's expected return is 4.645%. Dropping to a 2-year bond raises the expected return to 4.946%.* But two years isn't a very long time, when we're talking about financial security. And do you really want your money tied up for 30 years to get 4.645%? Your money can do better.

But that's not the only problem with bonds. If you plan on leaving your bonds to your children, their total value will count toward the value of your estate. Do you really want your children to have to pay estate tax just to inherit a bond? Why should it cost them money, when the whole purpose of the bond is to earn money?

There's a better way to generate income for yourself and pass what remains to the next generation with as little a tax burden as possible.

➡️ Want to talk to a real person about maximizing your financial assets? Call or email me for a personalized consultation!

Bond Maximization in 3 Easy Steps

Maximizing your municipal bond involves three things:

  1. Converting your bond into a single premium immediate annuity (SPIA) with a life-only option. You'll start receiving checks right away, and better yet, none of the annuity's value will be included in your taxable estate when you pass away.
  2. Gifting some or all of the SPIA proceeds to a trust. As of 2024, you're allowed to make $18,000 in annual gifts without having to pay a gift tax (this could change if the gift tax law is changed, however). Putting money in the trust allows it to take the next step in the process.
  3. Buying a life insurance policy that's owned and paid for by the trust but that covers you. This ensures your children get a tax-free death benefit that is also free and clear of any possible estate taxes. That's why the trust needs to own the policy, not you.

This bond maximization strategy dramatically increases the amount of retirement income available to you. The annuity is going to pay out much more than the interest on your bond. You'll also ensure that the life insurance death benefit won't be part of the overall value of your estate. In the end, you transfer the most money possible to your children without estate taxes or income tax.

I can take you through all three steps. Let me help you pass on your wealth as securely as possible.

➡️ Want to talk to a real person about maximizing your financial assets? Call or email me for a personalized consultation!

*Rates subject to change. Rates shown posted on MarketWatch.com, accessed 4/11/24.