This is a big departure from my normally somewhat "dry" postings, but as a baby boomer myself, I found this animated short quite funny and wanted to share it. Enjoy!
However, there is also a serious message there - despite our attempts to stay young, we are all growing older, and it is necessary to plan for incapacity and death in order to protect ourselves and our families. So complete your estate plan, and then get back to acting spry!
Click here for a good, concise article on one of the most important but frequently overlooked aspects of estate planning, particularly the interplay of IRAs and trusts. While the articles discusses the impact of estate taxes on IRAs, it does not mention that the current federal estate tax exemption is $2 million, so most IRA owners, even of relatively large accounts, need not worry about estate taxes.
However, providing protection of an inherited IRA from creditors, divorce and mismanagement,is something most people should consider. See my previous postings on IRA/Retirement Plan Trusts under the IRA heading.
The IRS recently published a notice naming four new frivolous income tax claims:
Needless to say, do not take any of these positions on your return!
This week I'm in Orlando at the University of Miami School of Law's Heckerling Estate Planning Institute. Yesterday there was a discussion of what may be coming down the pike as to the federal estate tax (death tax):
Date of New Legislation: It's unlikely there will be any action until after the November 2008 election. There are 35 seats open in the Senate, 23 of which are currently occupied by Republicans. The democrats will probably end up with the majority. In any event, we will probably see no movement until 2009.
Chance of Outright Repeal: No way, even if the Republicans are in charge.
Exemption Amount: The current amount exempt from federal estate taxes is $2 million, and it is scheduled to rise to $3.5 million in 2009. With a Democrat in the White house and a Democrat controlled Senate, the exemption would probably stay at $3.5 million for a number of years. If the Republicans are in control, the exemption will most likely be increased to $5 million. Any increases in the exemption as part of the 2009 legislation over $3.5 million per person would not be available in that year, but would instead be phased in over several years. The phase-in could be similar to what was proposed in HR 5970 in July 2006.
Rate: We will probably see the top rate decrease from the current 45% to 35%, although very large estates may face a higher rate.
"Portability" of Exemption Between Spouses: Very likely that the new legislation would provide that the surviving spouse could utilize both exemptions, in a manner similar to that proposed in HR 5970 and HR 5638.
According to ESRI, most of North Carolina's wealthy live in the Charlotte area, but the Triangle boasts eight of the top 25 wealthiest ZIP codes in NC. Most of the eight are in Wake County (27518 Cary, 27614 Raleigh, 27519 Cary, 27615 Raleigh, 27617 Raleigh, and 27539 Apex). Durham's 27712 ranks 24th, while Orange County is only partially included in the 27517 ZIP Code (number 16), which includes Chatham's Governors Club and Carolina Meadows. Chatham also gets in with Apex's 27523 (#21). The ratings are based on 2007 data for median and average household income, per capita income, average net worth, average disposable income, and average home value.
If you don't live in one of the these areas, don't feel bad - neither do I! And most of my clients don't either - I have many great clients in the 27312, 27514 and 27516 ZIP codes, and even in the eastern and western parts of the state, where only one ZIP code was included (27927 Corolla).
I previously blogged that employers would be required to allow post-death non-spousal rollovers of their retirement plans to IRAs starting in 2008. However, that did not come to pass:
This information is courtesy of attorney Phil Kavesh in California:
The IRS had previously announced that it would accept as part of the Technical Correction Bill to the Pension Protection Act of 2006 a provision that would require all corporate retirement plans to offer non-spouse beneficiaries a trustee to trustee lump sum rollover to an Inherited IRA, thereby allowing non-spouse beneficiaries to take advantage of RMD stretchout and avoid the one-year and five-year rules under most corporate retirement plans.
The Technical Corrections Bill recently passed did NOT include this provision and the IRS has decided not to move from its previous position that permitted each corporate retirement plan to decide whether or not to offer this rollover. This development means that those with corporate retirement plans who have reached normal retirement age and can take an in-service distribution or have retired and left their money in the plan should consider rolling it out to an IRA now, so that non-spouse beneficiaries may take full advantage of RMD stretchout. You may want to check the individual plan first, to see if it has been amended to allow the non-spouse rollover, as I anticipate that many plans will start to make this change over time. If the plan has already made the change, a current rollover would not be necessary.
For creditor, divorce and other protections for an inherited IRA, while still allowing the stretch, a standalone IRA/Retirement Plan Trust makes sense for most persons with retirement account values in excess of $200,000. See my posting on IRA Trusts.
We recommend that original Wills be kept in your safe deposit box. Contrary to popular belief, it is not difficult for your executor to access your safe deposit box after your death. As an alternative, in some counties the original will can be deposited with the Clerk of Court for safekeeping. Your executors and/or trustees should be informed of the documents’ whereabouts.
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