Read The Transcript Here:

Steven Jarvis, CPA (00:49)
Hello, everyone, and welcome to the retirement tax services podcast, financial professionals edition. I’m your host, Steven Jarvis, CPA. And this week is going to be a fun one. We’re going to take a common saying that we all throw around and actually give some context to it. Returning to the show is Eric Brotman to have a fun conversation with me. Eric, welcome back to the show.

Eric Brotman (01:10)
It’s so good to be back. I mean, it was such fun the first time. It’s an honor to be back.

Steven Jarvis, CPA (01:14)
Yeah, it’s kind of wild to me how quickly these things get away from me because it was almost two years ago you were on the show. You came and spoke at the summit in 2024, which again is getting a little while ago now, but when you’re over 250 episodes in, that’s what starts to happen.

Eric Brotman (01:27)
And the summer was amazing, yeah.

Steven Jarvis, CPA (01:29)
We’re really excited to ramp it up again for 2026. Just real quick, maybe for some of our newer listeners or, it’s been almost two years. Give us a little bit background on who you are and what you do. And then we’re going to dive into some fun tax planning topics.

Eric Brotman (01:41)
I am Eric Brotman, was the CEO and founder of BFG Financial Advisors in suburban Maryland, started the firm in 2003 and stepped down as CEO a couple of weeks ago, January 1st. And I’m now chairman of the board and chief growth officer and doing M&A and growing the firm and I’ve started a consultancy for financial advisors and I’m working as much as I ever did before but…I’m working with financial advisors and firms as opposed to retail consumers. So it’s an exciting time for us.

Steven Jarvis, CPA (02:11)
Well, Eric, congratulations. That’s an incredible moment in your journey. And obviously, you’ve got a lot of really extensive background in this. As we were getting ready for the show, the thing that stood out to me that I really wanted to talk about was actually something that you’re personally going through right now that I also hear from a lot of clients around this idea that, as I enter my next chapter, where do I want to do it? And as I look at the tax burden of one state compared to another, how much do I let the numbers drive that decision? And you mentioned at first, I mean, it’s a really common saying in the industry of, don’t let the tax tail wag the dog. But that gets kind of thrown out really casually, but there’s a whole discussion that goes on behind it. So let’s start with how we navigate this conversation with clients. And then I’d love to have you share some of your own thoughts on how you’re handling this personally.

Eric Brotman (02:57)
Well, thanks. this is one of the things that’s I don’t know if it’s weighing on my mind. Weighing is maybe the wrong word, but it’s in my mind because, you know, I still own the lion’s share of this firm. I’ve been selling gradually over time and there’s going to be a transaction at some point. And as many entrepreneurs and business owners know, when you do that, it is a potentially life changing event financially, but it’s also a very major tax event. And to be able to time that, in a way that is favorable based on not only whatever the federal rules are at the time, because you know as well as I do, every time there’s a change in administration or in the makeup of Congress, the pendulum swings back and forth, but also then, state by state. We’ve seen a lot of this with clients. I mean, we’ve helped an unbelievable number of folks relocate, and being in the great state of Maryland, where I’m born and raised and love being here, it is not a great place to retire. It’s a fine place to work and raise a family and educate kids. It’s not a great place to retire, financially speaking. And so, you you do have to make some decisions. And we’ve seen a lot of folks move to a lot of places, but most of them, there’s like a one-way street to Naples. There’s a lot of folks from here that go to Florida. We’ve seen folks in the Carolinas. We’ve seen folks go to Nevada. We’ve seen folks go to Texas and other places, but, and just on the shore. I mean, you know, I have a place at the shore and I love it, but I’m five miles from the Delaware line and life could be very different if I moved five miles. That’s silly, but true. And so having to start to think about that and recognizing the Delta is huge and we’ve helped clients. Yeah. I can think of one example where we helped clients sell a house. They sold a home in Maryland. They bought a condo on the beach in Boca Raton. Beautiful, beautiful condominium. Bought the condo. For cash it was dramatically less expensive than the house that was here Liked it so much that they bought a second one in the building so when guests came they could have a guest house and what they paid for it and what they saved in just income taxes made up for the entire condo fee on two condos it wound up costing them functionally nothing to live there because they were saving it in just income tax and these were retired people

Steven Jarvis, CPA (05:05)
Yeah. Yeah, Eric, the numbers can be staggering depending on the person’s situation. And this conversation comes up a lot, whether it’s the numbers might be bigger when you talk to business owners. But this conversation happens dozens of times a year for me where a client approaching or into retirement will come to me, even though they have a financial advisor. I’m the tax guy. So they’ll always bring up this question of, it’s usually a friend or an uncle or I saw something online of if I moved to one of these states where it’s income tax free, like think of all the money I’ll save. And I’m inherently a numbers guy, and so I’m with you, okay, let’s run the numbers and figure out what this is. But I know that you would also agree with that there’s so much more to the decision than just the numbers, because I’ve also seen those situations where someone makes a strictly tax decision and then is wildly unhappy. And then sometimes actually ends up costing themselves even more money because of the…Homes they’re buying and selling because of the travel, because of the guilt gifts they’re buying for kids or relatives that they don’t see anymore. Like this becomes so much more complicated. But when I hear people just casually say, don’t let the tax tail wag the dog, like I’m always curious, okay, but what was the rest of the conversation? Because that can’t, that cannot be the whole conversation.

Eric Brotman (06:12)
Well, it’s not. And also, it’s important to remember, income taxes are not the only tax to think about either. You know, here we also have to worry about being the only state in the United States with both an estate tax and an inheritance tax. They get you coming and going. So not only is this a lousy place to retire, it’s a terrible place to die. So drive carefully, everybody. So at the end of the day, that’s part of it. But then…There’s no free lunch. It’s not like you go to a place without an income tax and life is free. They have to have revenue from somewhere. They need roads and infrastructure and schools and hospitals and all the things that everybody else does. You have to pay for it somehow. The question is who does it? And I’ve noticed, some of it anecdotal and some of it just from traveling a lot, that there are certain places where the taxes on residents are dramatically lower than the taxes on tourists. And the first place that comes to mind is Nashville, Tennessee, because Tennessee is a very inexpensive place to live and a wildly expensive place to visit. The hotel taxes are high. The transfer taxes are high. You know, you can pay $12 for a bottle of beer because the tax on alcohol, believe in Nashville, and you might have to look this up, but I believe it’s either 25 or 50%. It’s something ridiculous. And it’s only in the city, and it’s because it’s all tourists. They’re finding a way to use that to keep the cost down for their residents and that makes all of the taxes there largely optional. It’s consumption based and it’s optional.

Steven Jarvis, CPA ( 07:36)
And this is where it’s so important to understand perception and psychology and kind of how these how these conversations evolve being inside of a client’s own head because so I live in Washington State I have most of my life for most of my life Washington State has been an income tax-free state. They’re trying really hard to change that but I think that I think income tax gets the focus because every year we essentially have this receipt We have a tax return that says here’s how much income tax I paid. And even, I mean, property tax in most states gets kind of lumped into at least two payments. So it’s a little less top of mind and front of mind. Sales tax, like, mean nobody really is taking the time to, oh, here’s how much sales tax I paid during the year. And we’re certainly not comparing it to what would it be a state over. And so I’ve got a relative right now that is used to Washington state, no income tax, and for primarily for family reasons is considering moving to Idaho, which definitely has an income tax. And so just for some perspective, said, hey, but let’s pull up total tax burden. And Washington state actually ranks a lot higher when you go all in with sales tax, property tax, and everything that goes into that. And even I live near the Idaho border. And when you go to the gas station, you just see the total cost per gallon. You don’t see the breakdown of, well, what’s tax and what’s the cost of the fuel. Until you drive across the state line, like between Washington and Idaho, and you see that gas, know, a hundred yards down the road is suddenly a dollar cheaper a gallon, and you’re like, wait, what just happened? And so, even on the math side, there’s more than just what will I save on income taxes. But anytime a client comes to me and says, hey, I’m thinking about moving to XYZ income tax-free state, because it’ll save me a ton of money, I say, okay, great,
but we need to talk through some other things about just your life and living the life that you want to live, not just saving money.

Eric Brotman (09:16)
Well, you’re absolutely right. First of all, the happiest retirees have a couple of things in common and one of them is not a low tax burden. That is not one of the things that makes you the happiest retiree. It’s lovely, but it’s not one of the things. To me, the happiest retirees are debt free. They’ve maintained their health and they have a purpose. They have a reason to get out of bed. They’re excited about things and they have a wonderful chapter in their lives. So that does come first. You know, we could all, I think, move to Alaska and probably save some money and not see the sun for a few months of the year. And some people love that. I’m sure that’s fine. I’m not sure I want that. So, yes, the social aspects of it matter. The health care matters. If you want to be someplace as you age. You want to be someplace with good hospitals because if you have low-income taxes but can’t get to the emergency room, it’s not going to matter, right? So that’s also an option. The other thing is we’re a different stage of your lives. Your tax burden is very, very different. you know, one of the things our home state talks about is that, we’re one of the highest per capita income states in the United States. So that means it’s a fine place to work. You’re making a significant more money than somebody in another state might. You’re giving more of that up as a proportion via income tax at the state level, but you’re making more money. So you can sort of justify that a little bit saying, well, I could move to, you I just saw that Pittsburgh is the least expensive metro area in the United States to live. To afford a home, the average, the household income to afford a basic home, a typical home in Pittsburgh is like $63,000 for a household income, which blew my mind. And it’s a neat city, I like it there. You know, every place is a little different. When you’re in your highest earning years, if you’re earning more to live a certain place, it may not be a problem to give some away.

Eric Brotman (10:58)
But when you’re retired, when you’re not in a position maybe to make more money and you need your money to last longer and you’re trying to use distribution strategies and all those things matter, you know, being in a state like ours that now has a surtax on capital gains at the state level, such that my capital gains rate is actually higher than my ordinary income rate in this state makes me not want to sell anything, which might make it even more expensive to be retired. So it’s just a lousy place for that purpose. And so coming up with the right solution does matter and real estate taxes matter sales taxes matter, although people don’t think about them except I was telling you about the Maryland Delaware line… 5 miles north of my beach home is no sales tax Delaware has no sales tax So what do you think people and and all the billboards on the highway are like, know last chance to last chance to buy that case of a beer before you have to pay 9 % in sales tax on it. So there’s definitely some play happening there. For me personally, I have to figure out not only where is quality of life and health care and you want to be near family. You know, I’m going to be empty-nested in two years. I have a 16 year old daughter who’s of course perfect in every way and she’s going to go off to school and I don’t know where. And I’m going to want to be able to visit her. Her mother’s going to want to visit her all the time and so forth. And so we’re going to want a presence somewhere. Doesn’t mean we’re buying a place and moving, that’s kind of weird, but it does mean we’ll want to be there, right? And then presumably if she settles down and gets a job and is in some place, we’re going to want to be there. If we’re ever blessed with grandbabies, we only have one kid. It’s not like we have four and we have to pick our favorite. We have one. And so if we have grandbabies, we’re going to want to be there. So if she’s living in Tennessee at the time, we’re going to want a presence in Tennessee. That doesn’t mean that needs to be primary residence though. And so that’s what it comes down to.

Commercial (12:41)
Text RTS to 55123

Steven Jarvis, CPA (14:06)
Well, Eric, I’m yeah, I like that you’re describing that with your daughter. My oldest is 15. So I got a few years more than you do. But I mean, those thoughts, those thoughts go through. Yeah, not much. My youngest is 13. I’ve just got the two. But I like that you bring it back to that because it brings up one of the things that I wanted to focus on or articulate, which is any tax plan we do, whether we talk about where we live or doing Roth conversions or anything else, the most successful tax planning I see is when the money that’s gonna get saved is tied to a bigger goal. We can all talk about how much everyone hates paying taxes and let’s stick it to the man, but that’s not really anybody’s motivation for paying less in taxes. At the end of the day, it’s either clearly tied to a goal or indirectly tied to I want more control of my money, which is noble goal, I’m all for it. Let’s pay only what we have to and not tip the IRS. But that’s, especially when it comes to a big decision like where am gonna live. That’s what I wanna tie it back to. And so what I’m talking to, those are the things we wanna understand. Say, do you have kids that are gonna impact where you wanna be spending your time or where you’re gonna want, do you have hobbies? Like, do you have preferences on weather and sunshine, those kinds of things? Because no amount of tax savings is gonna make up for you being otherwise unhappy. And so I love being able to help clients identify, okay, what are those more important goals? And then how do we accomplish them? Because there’s a couple of different client situations coming to mind. I love tying this back to the real world where understanding those goals can also help us with, okay, well then what makes sense from a timing perspective? Had clients a couple of years ago now who they had the flexibility and freedom that they literally were able to have a big impact on where they lived for a handful of years to save a ton in taxes and still accomplish those other goals. Now, some clients we would never have suggested that. We never would have said, hey, you should just live out of this rental that you’re renovating because in that state, here’s how this is advantageous and we can do these Roth conversions and like this is gonna be great. Because for them, it made a ton of sense. For a lot of other clients, it wouldn’t. They don’t want that lifestyle. They don’t wanna deal with that. They want the stability of being in one place. And so we’ve gotta understand so much more than just the numbers if we wanna help clients have great outcomes.

Eric Brotman (16:07)
I entirely agree with you and that’s why it comes back to that saying. I it really can’t be the only reason. I do think though, I do think though it’s a major especially for business owners. When there’s going to be a one-time event and that event can be inheritance although usually that’s not the issue. Usually, it’s the sale of something. So it’s the sale of the family farm which of course has situs, so it’s gonna be wherever the farm is anyway, right? But when it comes to the intangibles, comes to a business interest, do you relocate that when it comes to a trust? Do you have different trust situs for different reasons? You know, the Heckerling Institute, the University of Miami just spent a ton of time talking about there was a presentation that said it’s 10 o’clock at night, do you know where your trust is sited? You know, it’s that kind of thing. And so that does make a difference. And then also beyond the grave, as much fun as that is to talk about, like I’m trying to build a plan for our own family to where I’ll be able to leave all of the IRA money that I don’t use for QCDs and other distributions during my lifetime to charity. I’d rather give 100 % to something important to me than 50 % to the government. But that means having other assets that are structured properly and in the right kinds of trust that can go then to my daughter or grandkids without that tax burden. So there’s a lot of planning that goes into it, estate planning and tax planning and financial planning and for people who, and I agree, it’s not stick it to the man. It’s really how can this be advantageous? How can I satisfy all the various things that are important to me, whether it’s family or philanthropy or healthcare or other important things. But yeah, I’m struggling with it. I might have to come see you. You might have to do some number crunching for me.

Steven Jarvis, CPA (17:49)
Yeah, and Eric, I appreciate you sharing all those different pieces that go into this because it’s often not a simple decision. It also isn’t an all or nothing one time decision. I think sometimes people get hung up on, hey, I need to make this plan and this is going to the plan forever. things of all things change. Whether you end up with grandkids or not could impact some of that planning. You might get to a different state and after a couple of years say, hey, that was fun, but it’s time to move on to something new. I definitely have had very, just kind of open and transparent conversations with people who live in high tax states. it’s not that they misunderstand how much they’re paying in taxes in those states. They say, hey, you know what? I’m OK. I live in San Diego, and I will pay the extra taxes to be in San Diego year-round. I’ve visited San Diego. I get it. And so there’s so much that goes into it. So Eric, switching gears just a little bit, one of the things I found interesting on this topic with clients when the short-term answer is, hey, we shouldn’t do that just for tax purposes. Like, we should go ahead. I mean, there are lots of times where I’m trying to put the nicest smile I can on, yep, that’s a lot of taxes, but it’s OK to pay them. But I always try to be mindful of, just because this time the answer was pay the taxes and move on, I want to make sure the client knows that we’re going to keep having this conversation. Just because the answer was no this time doesn’t mean I don’t want the questions next time whether tax professionals, financial advisors, like we need to be aware of how we handle the conversations, especially when the answer is no, because we don’t want to shut down the topic for the future. Does that resonate at all with how you interact with clients?

Eric Brotman (19:12)
It does, and I really try not to say no. try to say that I’m not sure that’s the best way to do this, but ultimately it’s your money, it’s your plan, you’re going to do what you’re going to do anyway. I would not advise you to do that, but I can’t stop you if that’s what you want to do. We’ll work around it. I think there are some short-term moves you can make. You talked about living in one of your rental properties. You know, the same thing’s true if you’re going to sell a home that isn’t your primary residence. If you move into it for two years in a day, you can sell it and get your exemption. That’s a big deal. And if it’s a nice place to be, maybe you have a two-year hiatus, it’s a sabbatical, you can, especially with everybody working from home anyway, maybe that’s smart. So maybe before I sell the condo in Maryland and move to Delaware, maybe I live in the condo in Maryland for two years in a day, sell it, get my exemption, then move to Delaware and save taxes. That’s…a reasonable move. Now is that a lot of moving pieces? Is it a pain in the tail? Maybe. But does it save you enough to do it? I could move to Florida, sell the company, stay there for a couple years, and then leave, and what I saved on the sale of the company would buy my next home for cash. That matters. You know, that’s a number that’s like, all right, so if I move, it’s a little inconvenient, but I can get a free house. And that’s kind of what it is. And at some level you have to say, well, maybe that’s worth it or maybe it’s not. Maybe it’s, I love San Diego and I don’t care what it costs. That’s OK, too.

Steven Jarvis, CPA (20:30)
Yeah, well, I like how you recap that and maybe it’s worth it and maybe it’s not, but we need to have an informed and intentional conversation. What we shouldn’t be doing is just dismissing it out of pocket because it’s complicated or it’s whatever the case might be because it should be an individualized consideration of here’s how my priorities stack up, and yes, I would be okay with being in a different place for a couple of years or no, absolutely not. That’s just I want, here’s the club I’m part of, the charity I support, the gym I go to, whatever it is. Like those things are more important to me. And it can be a little bit gut-wrenching to say, yes, I’m going to pass up a $500,000 exemption by not making that rental property in another state my primary residence. Unless my top priority in life is just money, which is really never the case, at the end of the day, it’s always something else. Money is kind of like weight when it comes to health. The number on the scale is the easy thing to measure. It’s not really the most important thing.

Eric Brotman (21:20)
It counts, it matters, but it’s not the only thing. Thank goodness.

Steven Jarvis, CPA (21:23)
It counts. But it’s, yeah, but money is an easy measure. It’s not the most important measure.

Eric Brotman (21:26)
That’s true. And that’s why this is not a simple, here’s the calculation, now go do this kind of thing. There’s pros and cons. It’s the old Ben Franklin. It’s like, are the pros of doing this? What are the cons of doing this? Well, the pros are that you’re saving some taxes here. The cons are you’re going to be further away from your parents as they get older. And that might mean more flights and more travel and more living out of a suitcase if something happens to mom. And those things, they…They definitely matter. And you know, if you’re going and you’ve got parents you’re taking care of, do you take them with you? You say, mom, dad, you need to move. But my doctor’s here, my friends are here, my church is here, my whatever’s here. And that is, when other people are involved, it’s even harder. And married couples don’t, I know you’ll find this hard to believe, they don’t always agree on everything. Listen, that’s a secret, don’t tell anyone. But sometimes married couples aren’t eye to eye on everything. And one of them is where to live. You know, so If your spouse says, I would go to North Carolina, but I want nothing to do with Florida, and you decide you’re going to Florida anyway, that could be expensive in a totally different way.

Steven Jarvis, CPA (22:25)
Wow, and luckily for you, you’ve just got the one kid, so I mean, you both have the same favorite kid, so you don’t even have to decide which kid to live near.

Eric Brotman (22:32)
That’s right. Well, it depends if she has a favorite parent, and I would like to think she does, of course, but I would never say that out loud.

Steven Jarvis, CPA (22:37)
No, and certainly not on a recording that goes out to thousands of people. Never there. Never there. Yeah, Eric, there’s so much that goes into this. As you describe that, as you of talk through what that conversation would look like, it does make me think, OK, that goes in that small bucket that AI is never going to replace. I it’s not the topic of today’s conversation, but I’ve been getting a lot of, especially in the tax world, it comes up a lot of, geez, these tools are advancing so quickly. They’re going to put us all out of business. And it’s like, no, no, no. It’s going to keep taking away tasks I don’t want to do anyways. And then there’s this bucket that I’m just not worried about it ever taking away. And so that’s why I love having conversations like this and hearing from other people. Because if I got to spend more of my time helping clients navigate those conversations as opposed to doing the math, fantastic, I’m happy about it.

Eric Brotman (23:20)
Yes, absolutely. Let AI calculate whether you pay AMT or not, and you talk about what’s best for the grandkids and their education and their happiness. I’m not worried about AI. Maybe I should be, maybe I’m naive, but TurboTax didn’t put CPAs out of business. It put some tax preparers out of business, but it didn’t put… The good CPAs are still the good CPAs, and I still need one. I wouldn’t do my own taxes any more than I’d give myself a root canal, Steven.

Steven Jarvis, CPA (23:45)
Well, Eric, interesting on that. this will have to be a quick thing because we’re running out of time here. But I’ve been talking to a lot of people in the CPA industry recently, especially on the recruiting side of things. And the TurboTaxes and H&R blocks of the world are actually some of the heaviest recruiters out there, trying to find real people to answer the questions and help navigate. Because even though they put into it, puts billions of dollars into their tools. And they still need real people behind it to handle a lot of the exceptions. There’s always going be opportunity for people who are skilled and willing to work hard.

Eric Brotman (24:15)
Well, this is a totally different episode, but that speaks to the absurdity of our tax code in the first place. The fact that I could take my documents, give them to 10 CPAs and get 10 different returns is part of the problem.

Steven Jarvis, CPA (24:27)
But if you only get 10, you might get 12 different returns from 10 different CPAs. You never know.

Eric Brotman (24:30)
Well, yes, option A, option B. How aggressive would you like to be? Do you want to take this or not? And it is as much art as it is science, but I agree with you. I think the human touch and the communication that goes beyond the numbers is priceless and not outsourceable.

Steven Jarvis, CPA (24:44)
Yeah, well, Eric, I think this is all a great conversation. I love that you’re willing to share your perspective, including on your own situation. I think the biggest takeaway for people listening really should be that while it’s easy to try to sum up big ideas with short little phrases, and we all repeat them of, don’t let the tax tail wag the dog, we’ve got to remember that if we want to be real professionals, if we want to deliver massive value to clients, there has to be more to the conversation. And focusing, learning from other advisors, coming to things like the summit,
and being able to hear from other people of, here’s a way I’ve found to successfully navigate that conversation. Here’s objections I’ve heard. Here’s where this has gone wrong before and I learned from a lot of pain. I always really appreciate the people who are willing to admit, yep, here’s a mistake I made before and what I learned from it. That’s so real and impactful that I love being able lean into those opportunities.

Eric Brotman (25:29)
It’s important to admit our mistakes. Any of us claiming to be perfect, Run from anyone who says, I’ve never made a mistake before, because they’re due.

Steven Jarvis, CPA (25:36)
Yeah, yeah, if they say that they’ve never made a mistake or that they’re the answer for everyone. So, Eric, before we wrap up here, how can people learn more about what you’re doing?

Eric Brotman (25:43)
Well, for folks who want to check out the financial planning arm of our business, go to bfgfa.com. You can also check out our financial literacy resources at bfguniversity.com. And for financial advisors who are watching, you can go to brotmanconsultinggroup.com and learn a whole lot about the work we’re doing with other advisory firms around the country and having fun doing it.

Steven Jarvis, CPA (26:04)
Love that. We’ll include all the links in the show notes. And Eric, you were kind enough to say nice things about it before, but we are getting geared up for Summit 2026, September 27th through 30th. We’re way ahead of where we were last year for registration. So we’re very excited that once again, this event will sell out and there’ll be a room full of people who are doing this in the trenches and willing to share with each other. And it’s such a great opportunity to learn. So go out to retirementtaxservices.com to get your seat today. Eric, again, thank you so much for taking the time to be here.

Eric Brotman (26:33)
It’s been a pleasure, and I’ll see you in two years, if not at the summit.

Steven Jarvis, CPA (26:37)
Well, to everyone listening, thanks for being here and until next time, good luck out there and remember to tip your server, not the IRS.