Idaho Estate Planning

Inherited IRAs in Idaho Still Require RMDs

The different ways you inherit assets are just as varied as the assets themselves. Such is the case with an inherited IRA. When is it “yours” and how do you avoid tax issues?

The Slott Report recently addressed the consequences of when a surviving spouse inherits the IRA of their deceased spouse and both have reached age 70 ½, the age for Required Minimum Distributions (RMDs). The article titled “Inherited IRA: When do You Own It?” noted that one must be very careful.

For starters, the inheriting spouse must be the “designated” beneficiary. Assuming that is the case, what happens when your spouse dies in December and has not withdrawn the required RMD? Must you as the surviving spouse calculate your RMD on both account balances, your spouse’s and your own?

RMDs are always tricky because the penalties are steep, with a 50% penalty tax on the amount required but not taken.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we'll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

 

Careers for Boise Idaho Retirees

This "best of" blog comes from June of 2011. Enjoy!

If you are a Baby Boomer nearing retirement, you probably have a different concept of retirement than your parents. Retirement for you may not mean an extended vacation on some sunny shore, but rather a new phase of your working career. A phase that may, perhaps, bring more than just another paycheck, but a new sense of meaning to your life. Morningstar recently referred to this career transformation as the “encore career.”

Of course, it’s not just the search for meaning that motivates Baby Boomers to pursue an encore career. As Morningstar points out, tough new economic realities have transformed career reinvention from a virtue into a necessity for millions of older Americans who aren’t ready to retire or simply can’t afford to quit working. 

Interestingly, though the job market looks fairly bleak today, some economists predict labor shortages in key social sector jobs. Barry Bluestone, an economist at Northeastern University in Boston, predicts that within the next eight years, there could be at least five million job vacancies in the U.S., nearly half of them in social sector jobs in education, health care, government and non-profit organization. Bluestone also predicts that Baby Boomers are going to be filling those jobs, "We're going to see a remarkable reshaping of our labor force. The rate of labor force participation by the 55-plus population is going to be much higher, and older workers will represent a much higher percentage of the overall workforce."

The Morningstar article includes a table ranking Projected Encore Career Growth 2008-2018. You might want to check it out. I note that job growth is predicted to be particularly strong for teachers, nurses and other health care providers … and not so much for lawyers.

For more information on this and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

Your IRA Can Benefit Your Favorite Idaho Charity

One thing you should never forget about your IRA – even though you make contributions with pre-tax dollars, and once inside these accounts your money grows tax-free, the government is counting on getting their share of tax revenue from you at some point. Which is why only those over age 70-1/2 are eligible to make tax-free transfers (of no more than $100,000) from IRA funds directly to charity. By limiting eligibility and capping the transfer amount, the government limits their exposure to lost revenue.

So, why might you want to utilize this IRA-to-Charity strategy? A Charitable IRA Rollover lets you give to your favorite charity while avoiding taxes on IRA distributions. Consequently, this is a very popular win-win strategy for taxpayers who have accumulated a lot of money in their IRAs, but don’t need the money to live one – and would rather be “voluntary philanthropists” as opposed to “involuntary philanthropists.”

A recent Kiplinger article titled “Who Can Transfer IRA Funds to Charity?” explains the ins and outs of Charitable IRA Rollovers. If you think this strategy would be appropriate for you, beware. There are strict rules governing the proper execution of these transfers, as well as their ultimate tax-treatment.

While Congress generally approves the use of this strategy on a year-by-year basis, the good news is that they already approved it for this year. This means you should have plenty of time to plan if you’d like to make a charitable transfer this year.

For more information on IRAs and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

Mother's Day Special - Helping Parents Prepare for Their Future

Another oldie but goodie from January 2011 made more timely by the celebration of Mother's Day today. Our Moms (and Dads) deserve our attention when it comes to their potential long term care needs.

There is a very good chance that you or someone you know is taking care of elderly parents now or looking at that possibility in the near future. In 2008 a USA TODAY/ABC News/Gallup Poll of baby boomers found that 41% who had a living parent were providing care for them — either financial help, personal care or both — and 8% of boomers said their parents had moved in with them.

Of those who were not caring for an aging parent, 37% said they expected to do so in the future. About half said they were concerned about being able to provide such care.

 If financial planning and long term care planning have not been done previous to the need for care, the burden falls on the caregiving family member. Decisions about how care will be paid for, who will be responsible for managing the estate as well as how the long term care will be given can cause stress and contention among family members.

It is best for parents and all family members to be involved in planning for future financial needs. The financial resources being used today could change drastically with the occurrence of a stroke, illness or onset of dementia. In order to plan financially for long term care, you need to know what the costs are now and what they will be in the future.

Every year MetLife does a survey of long term care costs. Their 2010 survey shows that the average daily rate for private nursing home is $229 which is up from $219 in 2009. Assisted living monthly base rate cost rose to $3,293 in 2010 from $3131 in 2009. Home health aides average $21 an hour.

Planning financial needs can be very difficult, considering you do not know when long term care will be required or how long it will be needed. Staying in the home for care will require professional home care assistance, travel accommodations to doctor appointments, help with shopping, meals, medical supplies and medication and possibly a 24-hour attendant. Even if a family member is doing most of the care, in most cases professional care will eventually be required or a move to a nursing home facility will be necessary.

When evaluating present income and assets consider how they would work for future needs. Consider the following:

• Care options
• Long Term Care Costs
• Long Term Care Insurance
• Home Care Costs
• Medicaid Planning
• VA Benefits & Planning
• Legal Documents – Estate Planning 

For more information on this and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

Idaho Do You Understand Your IRA, RBD and RMD?

When a loved one is no longer with us, do all of their financial and legal affairs cease? For the most part – yes. But when the loved one is over the age of 70 ½, there could be an exception in the form of their final RMD on their IRA.

Many surviving designated beneficiaries of a decedent’s IRA do not realize that Required Minimum Distributions (RMDs) have to be taken annually and up to the end, even if the owner died earlier in that year. In fact, the year of death IRA distribution is a requirement that is easy to miss.

Recently, The Slott Report took up this matter in an article titled “Taking the Year of Death IRA Minimum Distribution.”

Essentially, the RMD is required because there is an attending tax burden involved. As you likely are aware, any individual over the age of 70 ½ must take RMD from their IRA. When it comes to the year of death for such an individual, their designated beneficiary of the IRA beneficiary must take the RMD even before inheriting the IRA itself.

OK; simple enough. The trouble is that it is difficult to track whether the decedent had already taken their full RMD in the year of their death. For example, were they on a monthly installment plan? Were they waiting until the last moment? Did they miscalculate?

So, what is the penalty for failing to take the full RMD? Would you believe a whopping 50% of the shortfall?!

If you are the IRA owner, then you can see how accurate and communicated recordkeeping can help your loved ones (i.e., your designated beneficiaries) avoid an unpleasant treasure hunt to determine the post-mortem status of your RMD. 

For more information on IRAs and Estate Planning, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

ESOP & Idaho Business Succession

Businesses are formed in many ways, and we have come to know those varying abbreviations (S-Corp, C-Corp, LLC, LLP, LP, LTD, and so on and so forth) that represent each varying business.  But when it comes to passing on your business, there is another acronym to consider: the ESOP.

So, what is an ESOP, what can it do, and is it right for your business?

ESOPs, or Employee Stock Ownership Plans, are a tricky breed. Essentially, an ESOP is a tool recently highlighted by Congress and featured by The Wall Street Journal in an article titled “Founders Cash Out, but Do Workers Gain?” Planning to exit a business is all about doing one of two things; either restructuring the business or selling it outright. With an ESOP you accomplish both goals and build the company around the very employees that compose the company in the first place.

Rather than going out and hunting for a buyer, the employees become vested in the stock ownership of their own company. In turn, the ownership stake simultaneously becomes a retirement asset while the ownership of the founder is bought out.

Now, if you are already familiar with this approach, it may be worth reading the original article since there are certain limitations affecting the employees-turned-owners. The article gives examples of how an ESOP can work a win-win for all concerned under the right circumstances. These examples include Bob’s Red Mill, for example, or, from a different industry, Manson Construction Co.

ESOPS have been a powerful tool in an otherwise soft market for business transfers. Accordingly, ESOPS are worth a good look, and then even a second look, as a unique and proven business succession strategy.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we'll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

Boise, Meridian, Eagle, Nampa, Caldwell - Have the Inheritance Talk!

Don’t we all dread certain “talks” we’re supposed to have with our children? But even though we’d like to avoid “the talk” – when it comes to things like inheritance, it’s best to kick procrastination to the curb and face the challenge.

Add “the inheritance talk” to the short list of intergenerational talks too important to avoid. So, how do you prepare and execute this too-important-to-avoid chat?

To be blunt: there is no easy answer. Why? Because so much of the talk depends on what you have to leave, who is going to manage it, who is going to inherit it, and how soon are they going to get it?

The Wall Street Journal recently offered a pep-talk for estate planning parents in a recent article aptly titled, “The Inheritance Conversation. Ugh.”

One of the key reasons for this essential intergenerational communication is to prepare the inheriting generation for the attending responsibilities. One challenge, of course, is that any “inheritance” carries the risk of robbing a developing person of their work ethic.

In short, what makes you, your assets, and your heirs unique? That is what needs to be understood and communicated. The sooner you have the inheritance talk, the better it will be for all concerned.

At Idaho Estate Planning, we can help you find the resources you need to put your estate plan together. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident.

 

Idaho Residents Living Overseas Face Complicated Tax Issues

Traveling abroad can be exhilarating enough, but living abroad comes with a whole other level of excitement … and even some hitches if you aren’t careful. If you are one of those hopping back and forth across a U.S. border, beware of the financial hurdles and heightened attention of the IRS.

If you are no stranger to frequent border traffic, then likely you are aware of the recent adjustments in IRS practice, not to mention several large developments involving overseas accounts and income. Essentially, the IRS is on a mission – it wants to capture more and more overseas accounts and assets taxable under U.S. law. How? By working in sync with international banking institutions.

Ostensibly, the targets are tax-evasion type accounts in Swiss banks. In reality, the dragnet is catching a broader group of individuals and families of all means and intentions. And many of these individuals and families are unaware that they are targets and even fewer are aware the rules of the (tax) road.

The problem has been growing with the surge in IRS attention to the matter and The New York Times tackled the issue not too long ago in an article titled “Overseas Finances Can Trip Up Americans Abroad.”

Bottom line: if you’re going to be crossing borders regularly, whether for work, for family, or even as part of your retirement, then this is an important reminder about the hurdles those little lines on the map can pose if you aren’t careful. Whether you work, live, or retire abroad, it’s important to be aware of the new international complications.

Elder Scams on the Rise in Idaho & Nationwide

This is not a new topic for us as a quick scan through our past blogs will show. I came across a nice article from Florida with some good pointers I would like to share. The article titled Scams on the Elderly: Senior Care Tips for Fraud Prevention is a good read.

The article gives a few pointers on helping our parents or other loved ones avoid Elder Abuse.

• Regularly evaluate how things are going for your loved one. Hire a geriatric care manager to help you keep an eye on things from a distance, get a periodic evaluation and check in with calls and in-person visits. Continual communication can help you spot issues, as well as give your loved one opportunities to mention concerns. A professional assessment (and ongoing evaluations) can help determine when it may be necessary to assist with managing finances and household maintenance. Contact us to learn more about geriatric assessments and other eldercare assistance services.
• Share information about popular scams with your loved one and educate on issues such as giving out personal information.
• Help set up a dignified "out" for solicitations. Perhaps your loved one can say they have their "advisor" review everything before they make decisions (whether that really is some type of professional advisor, or running it by you). You might even suggest/share that you do the same yourself, as it is easy for anyone to get caught up in scams and some time to think about purchases and decisions helps.
• Determine ways to simplify finances and possibly consider a system for oversight (regular review/access by a trusted professional or family member).

At Idaho Estate Planning, we understand the challenges faced by elder Americans. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident.

Remember Treasure Valley - Even In Death - There's No Substitute For Cash

A million dollars worth of art is quite a collection!  But this illiquid asset isn’t exactly helping one’s heirs upon death. When it comes to burial costs, cash is still king. The family of Merton D. Simpson knows this all too well, as they encountered this challenge upon Mr. Simpson’s death.

In short, “illiquid assets” can present a great challenge to proper planning for you, your family, and your estate.

While there are countless examples, a very recent and public one is the case of the aforementioned Merton D. Simpson. As reported by The New York Times in an article titled “Art Worth Millions, Yet No Cash for Burial,” careful planning is required to meet “liquid” cash needs virtually every estate encounters. Whether paying last health care expenses or other debts, you at least want to have enough cash for your funeral.

Mr. Simpson’s entire estate was worth millions in a vast collection of African and modern art, not to mention art in his own name as an artist of no little esteem. Tragically, in the end there was no money for the funeral. In addition, what happens if and when the taxes come due? That’s when expensive collections of illiquid assets are sold at auction, oftentimes for pennies on the dollar.

Now there’s more to the story of Mr. Simpson and many more lessons to be gleaned regarding proper financial and estate planning, as well as a bit of family intrigue. The takeaway: if one dies with an estate of priceless, illiquid assets – then one’s estate may find itself deep in the desert with a purse full of gold, but not a drop of cool water to drink.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we'll put together a plan that works for you and your loved ones. Remember, good planning is no accident.