Search Results for: IRA
SECURE Act New IRA Rules
IRA Trusts as IRA Beneficiary
1. Revocable trusts can be executed and filed with the IRA institution which enables payout (distributions) from the IRA to be payable to separate Revocable IRA Trusts for the benefit of a child or grandchild after the death of the IRA owner. Upon the IRA owner’s demise, distributions will be paid from the IRA institution to the revocable trust. The trustees selected will then issue a check payable to the beneficiary of the trust based upon the life expectancy of the beneficiary and the account balance of the IRA. Any amounts payable to a minor will be payable to a custodian under the Uniform Transfers to Minors Act or similar act for the benefit of such minor.
2. The IRA distribution elections and designation of beneficiary forms will be filed with the institution designating the IRA revocable trusts as beneficiary to receive distributions upon the IRA owner’s demise.
3. The trustee or beneficiary of the IRA Trust may accelerate payments at a certain age contained in each trust.
4. Each trustee will be listed in each trust document together with the powers given to the trustee.
5. All funds given to a grandchild will be taxed at the parents income tax level until they reach a certain age determined under the IRS rules. Thereafter, they will be taxed at their own rate which should be substantially less than the parent’s income tax bracket and the funds bypass the child’s estate tax.
Advantages of the IRA trust as a beneficiary
1. If the IRA death benefits are payable directly to a designated beneficiary, then the death benefits may be accelerated at the designated beneficiary’s will. A trust can prevent unnecessary acceleration.
2. If the IRA death benefits are payable to a trust, the trustee may elect an extended payout period if the IRA owner dies before the required beginning date.
3. A mature trustee will control the investments while the assets are in the IRA.
4. If the IRA death benefits are payable to a trust, they may be protected from the creditors of the designated beneficiary under state law and/or in a divorce proceeding.
5. If IRA death benefits are payable to a trust, they may be protected if the designated beneficiary declares bankruptcy.
6. If IRA death benefits are payable to a trust for the benefit of a minor, it avoids the jurisdiction of the probate court or a similar court that has jurisdiction over the minor’s assets, posting of bonds and appointment of custodians.
7. If IRA death benefits are payable directly to a minor, then the probate court or a similar court is involved. The probate court or a similar court may not go along with an extended payout period of IRA distributions.
8. The trustee may reimburse the estate of the deceased IRA owner for the estate tax liability attributable to the IRA. (In most cases, estate taxes due on the IRA should be paid from another source if available.) This protects the executor of the estate and avoids problems in obtaining reimbursement from a designated beneficiary who may have otherwise dissipated the IRA assets.
9. Multiple IRAs should be established and each may have a different designated beneficiary. This permits income splitting between children and/or grandchildren.
10. A trust for a child or grandchild may be necessary if he or she cannot handle money or would not otherwise reimburse the executor of the estate for the estate tax liability attributable to the IRA on a voluntary basis.
11. The life expectancy of a grandchild will generally result in a greater deferral of income then if a child was the designated trust beneficiary of the IRA.
12. Grandchildren have a greater benefit from the growth of IRA insteade of a child because of their longer life expectancy. This should save a considerable amount of estate taxes on the subsequent death of a child.
13. The revocable trust is not an irrevocable beneficiary. The IRA owner may change his/her beneficiary or designated beneficiary at any time during his/her lifetime. The IRA owner must continue to take distributions from his/her IRA commencing at the required beginning date and as always may accelerate distributions according to his/her date of birth.
Disadvantages of the IRA trust as a beneficiary
1. The legal costs of establishing the revocable trust.
2. The annual costs of preparing trust income tax returns after the death of the IRA owner.
3. The cost of informal or formal accounting of the trust transactions.
INSTITUTE FOR ESTATE PRESERVATION
THE ADVANCED INSTITUTE FOR ESTATE PRESERVATION
The Advanced Institute is a professional training course that offers an extensive education on current topics affecting your estate planning practice. Each subject is presented by an expert in the industry. An example of training topics are Medicaid and Veterans Planning, When a Corporate Trustee is Necessary, The Power of Trust Provisions, IRA Trust Planning, Settling the Estate, and more. The Basic Institute course is preferred prior to attending this course.
THE BASIC INSTITUTE FOR ESTATE PRESERVATION
The Basic Institute is a professional training course that offers a solid education on living trusts, solutions for clients and higher net worth clients using advanced planning concepts, how to properly execute and fund a revocable living trust, steps for estate settlement, available marketing materials and how to use them, and where to look to potentially unlock new business and more.
TOPICS YOU WILL LEARN IN THE BASIC ESTATE PRESERVATION TRAINING INSTITUTE
The History of the Living Trust and Its Relevance Today
The Dangers of Probate
The Revocable Living Trust System
The Revocable Living Trust – 222 Provisions
Ancillary Documents in a Good Trust System
The Planning Team and Avoiding the Unauthorized Practice of Law
Client Generation, Marketing, and New Internet Systems
Advanced Planning Vehicles
The Estate Planning Client Process
Building Estate Planning Office Systems
Working with The Estate Planning Source
Putting Your Plans in Motion
Case Studies
ONLINE TRAINING & EDUCATION
Various information, training and educational material available to network professionals
Comprehensive Estate Planning Documents
Comprehensive Estate Planning Documents – Revocable Living Trusts – Will Package – Ancillary Documents
What Gives Our Documents the Leading Edge?
Detailed and comprehensive, these documents have been developed through nearly 30 years of hands-on improvement by hundreds of attorneys throughout the US resulting in thousands of satisfied clients. They are drafted to ensure accuracy with current state and federal laws, and are updated as changes occur.
The Revocable Living Trust contains over 222 carefully worded provisions so that the trust can accommodate a client’s changing circumstances and to cover additional contingent situations without needing to be legally modified. The trust is also universal; that is applicable in all 50 states, for a client may eventually own property in or even move to another state.
I Would Like an Advisor to Contact Me to Discuss My Estate Planning Needs
Here is a list of what our package includes:
- 1 set of Ancillary Documents per person (DPOA for assets, DPOA for healthcare or Advanced Directive, Living Will, Nomination of Conservator, Appointment of Guardian, and Anatomical Gift)
- Abstract of Trust
- Trust Certification
- Pour-Over Will
- Assignment of Furnishings and Personal Effects
- 1 three-ring professional quality binder with tabs and inserts
- 1 set of quality documents with Plain English summaries
- Funding Manual
We offer a wide variety of estate planning solutions and documents customized at your direction.
Nationally Transportable Living Trusts
Single A Trust
Married A Trust
Married/Unmarried AB Trust
Married ABC Trust
A Q-TIP Trust (for married person)
Partner AA Trust
Partner AB Secure Trust (for Domestic Partners)
Complete Amendment
Partial Amendment
Vital Ancillary Documents
There are a number of other legal documents that are not legally required parts of the Living Trust but which should be included in or with the Trust to provide for future contingencies. Our ancillary documents offer you additional control over your person or assets. These documents are so vital; they are included, at no additional charge as part of your comprehensive document package.
Pour-Over Will
Living Will
Durable Power Of Attorney For Health Care
Durable Power Of Attorney For Assets
Nomination Of Conservator/Guardian
Appointment Of Guardian
Anatomical Gift
Advanced Planning Vehicles
Because many individuals have needs that go beyond basic estate planning, we offer numerous Advanced Estate Planning Solutions that can be incorporated into your overall estate plan. These documents should be considered as a supplement to your Living Trust to shelter your hard-earned estate from unnecessary estate taxes.
■Asset Management Trust (Spendthrift Trust)
■Beneficiary Trust (Dynasty)
■Buy/Sell Agreement
■Catastrophic Illness Trust (Medicaid Planning Trust)
■Charitable Remainder Trust
■Family Catastrophic Illness Trust
■Gift Trust
■Insurance Preservation Trust- Spousal Support (ILIT)
■Insurance Preservation Trust (ILIT)
■IRA/Qualified Plan Trust
■Land Trust
■Special Needs
“A POORLY WRITTEN TRUST IS WORSE THAN NO TRUST AT ALL.” Henry Abts, III
A poorly drawn trust can become a restrictive nightmare for the surviving spouse or successor trustee and beneficiaries. As long as the clients are living, it does not matter what a Living Trust says, because it can always be revoked. However, upon the death of the client, these poorly written Trusts are going to end up in probate court, with petitions being presented to revise or clarify the Trust wording. (Even though the main advantage of a Living Trust is to avoid probate, a Trust falls under the legal jurisdiction of the probate code; any need for clarification of a Trust therefore must be handled in the probate courts.)
One size does not fit all – no two people or families are alike! Your family’s needs, dynamics, personalities, and values are unique. If you use a form kit, you are asking for problems. Even LegalZoom.com reveals that 80% of people who fill in blank forms to create legal documents do so incorrectly. Plus, if your Will or Living Trust is not executed properly, it becomes invalid. If you overlook the opportunity to write specific instructions about how you want to provide for your spouse and children, your family will receive whatever the “cookie cutter” document provides, and you may not know of other options. The only estate plan you rely on is the one that is custom prepared by a qualified estate planning professional attorney.
A well-written comprehensive trust document comes about only through extensive experience. The Estate Planning Source’s trust documents are the result of more than 28 years of working together with legal counsel to cover every imaginable contingency.
Why You Need a Lawyer to Create Your Estate Plan
In California, a case has recently been filed against Legal Zoom; an online site that markets wills and trusts without the need to meet with an attorney. The case involves a man with a terminal condition who used Legal Zoom to draft a trust and pour over will. The documents were signed but the trust was never funded because financial institutions that held the man’s money refused to recognize the validity of the documents. The man died without getting the trust funded.
It remains to be seen what the outcome of the case will be but it does highlight the importance of getting a lawyer to draft your revocable trust and companion documents. In most cases, a face to face meeting will elicit important facts so that your trust and other documents accurately reflect what you want to happen after your death.
Some circumstances that dictate hiring an attorney to create an estate plan are the following:
1. You are in a second marriage with children of other relationships
2. You own real estate in more than one state.
3. You want to benefit a charity in some way
4. You own a business and want to provide for someone to take over the business after your death
5. You have a taxable estate.
6. You have substantial assets in 401(k)s or IRAs
7. You have a beneficiary who is disabled
8. You have minor children and want to provide for distributions to them at intervals or for specific purposes.
9. Your children have drug or alcohol problems and need a trust that will take that into consideration
10. You want to have someone you can call when you have questions or want to make changes in your documents.
Roy M. Doppelt & Associates
What is the Best Asset Protection Plan for Physicians?
In our initial discussions with a client these questions always comes up “What’s the best asset protection plan?” “Are there any plans which are completely bulletproof?”
Like any well trained professional I usually duck those kinds of direct and unconditional questions. After all, this is the legal system we’re talking about and when we compound the mixture of judges, jurors and lawyers, the results can be unexpected, to say the least. Law is probably a lot like medicine in that respect. So while we can’t honestly guarantee that the particular plan we design will produce the exact outcome we want, we do know what has happened before in similar situations. If existing case law and legislation is clear and well developed then an asset protection plan that falls within the pre-set boundaries will have favorable and predictable results.
The O.J. Simpson civil case demonstrates this principle in the most dramatic fashion. Despite the fact that the families of the victims have vigorously pursued collection of their $33 million civil judgment for more than 10 years, they have been largely unsuccessful. The reason for this is that a large portion of Simpson’s assets are held in retirement plans which are exempt from judgments. The law specifically protects from collection the total amount in such plans as well as any proceeds which are distributed. Published reports are that Simpson had approximately $4.1 million in his retirement plans and draws a benefit of $25,000 per month, completely shielded from the judgment.
Although we’ve seen many similar results in less notorious cases the asset protection in the Simpson case was well supported by law and withstood persistent and sophisticated attacks from the victim’s families. Regardless of the appalling result in this particular case, what is well illustrated here is that legal techniques such as a protected retirement plan can shelter substantial assets from liabilities and judgments even in the most egregious circumstances. If one of your goals is to protect your savings from the risks of your business and medical practice then it is worth considering the pros and cons of the retirement plan strategies.
In order to take advantage of the asset protection features of a protected retirement plan, the plan itself must be developed and designed so that it qualifies under the law as an exempt asset – free from potential judgment claims. Since the law often varies from state to state and Federal law may apply in some circumstances, I’ll provide some general rules and guidelines and you can discuss the specific details of your case with your local attorney.
Qualified Plans – The first group of plans that are exempt are those well-known ERISA qualified plans, such as defined benefit, profit sharing and 401(k) plans. Both Federal and state law clearly protect the amounts in these plans and any distributions which are made. There may be exceptions for some court ordered family support obligations and possibly federal or state taxes, but as a general rule the protection of these plans from lawsuits and judgments is very strong. The drawbacks of these plans are that if you have several employees, in your practice you may have to make contributions for them also – you can’t just cover yourself in a qualified plan. As a result, the expenses of covering all employees, preparing the necessary filings and paying for annual administration may exceed the tax and asset protection benefits. A careful evaluation of all aspects of these plans is required to measure the costs and potential advantages.
Self-Employed Plans – If you are self-employed and your plan covers only yourself (IRA’s and solo 401(k)’s) the amount exempt from a judgment varies significantly based on the law of your particular state. Some states protect the entire amount in these plans while others shield only the amount necessary for reasonable retirement needs, a vague and subjective standard which you probably wouldn’t want to rely on. If a big part of your savings is or will be in an IRA, determine with your attorney whether it is exempt from judgments in your state. Also, consider whether the amount of your contribution limits to your IRA is sufficient to shelter a significant portion of your savings.
Private Retirement Plans – In some states (such as California) the law allows for the creation of a Private Retirement Plan which is entirely exempt from judgments. These plans must be carefully drafted and maintained but they are highly flexible in design, need not cover other employees and annual contributions can substantially exceed those available under the qualified plans or IRA’s. (See www.rjmintz.com/misc/asset-protection-articles/what-is-the-best-asset-protection-plan-for-physicians/) Although no tax deduction is available for these contributions, the complete exemption for amounts in these plans may be highly valuable in a wide variety of circumstances and should be considered as a stand-alone asset protection plan or in conjunction with a tax deferred account.
Make sure to talk with your attorney and tax advisor to see which of these retirement plans provides the best asset protection in your state and that you understand the legal and tax consequences of the strategy which will apply in your particular case.
Robert J. Mintz
Retirement Accounts – Who is the Beneficiary of Your Account?
Have you checked your beneficiary designation for your retirement account recently? If not, you may find that your designated beneficiary is not who or what you think it should be, especially if you have divorced, remarried or had children since your retirement plan account was established.
Outdated Beneficiary Designations
There have been numerous cases of retirement-account owners who have been divorced and remarried but have neglected to update their beneficiary designations accordingly. This can be quite frustrating for their survivors, who must battle in court for a legal determination of the true beneficiary. The court's decision, however, may not necessarily be what the deceased would have wanted.
A similar dilemma arises if children are named as beneficiaries but the document has not been updated to include those who were born after you set up your account. To prevent these situations, you should update your beneficiary designation periodically or even immediately after you experience a change in family status. Should you need to, you may submit a change-of-beneficiary form.
Per Stirpes Designations
In the event your child predeceases you, a per stirpes beneficiary designation would allocate that share to the child's issue – your grandchildren. If you don't name them, they will be disinherited from taking the share of their parent.
Make Provisions for Simultaneous Death
Many spouses, expecting that one will predecease the other, name each other as their designated beneficiaries. The issue of simultaneous death is then addressed by state law, which will determine that one spouse died first, even though both deaths occurred at the same time. This determination is critical, especially if there are children from a previous marriage: will all the children be included? Or will children from a previous marriage be excluded? Proper documentation designating successor beneficiaries for normal and extenuating circumstances will ensure that the retirement-account owner decides who the successor beneficiary is.
Look into a Trust for Your Distributions
If you feel you need to retain some degree of control over the disposition of the retirement assets after your death, you may consider designating a trust as your beneficiary. Designating the right type of trust as your beneficiary could offer these benefits: allow you to provide financial support for your surviving spouse while ensuring that children from previous marriages are also provided for; helping to maximize your estate tax exclusions; and controlling distributions to the children you might think are not mature enough to handle a large IRA. Trusts require expertise to set up correctly, so please ask me for some assistance before you make any decisions regarding customized and/or trust beneficiary designations.
Beneficiary Designation Checklist
Check the default provisions of the document that governs your retirement account, as it may come into effect if your beneficiary predeceases you and you fail to make subsequent changes.
Look into the tax implications for the kind of beneficiary you choose, whether a particular person, such as a spouse or non-spouse, an entity, such as a charity, your estate or a type of trust.
Request a confirmation of receipt of the designation from your retirement account trustee, custodian or administrator. Documents do not always reach their intended recipient and/or may get lost in transit. Beneficiary designations are considered in effect only if they are received by the responsible party (e.g. trustee, custodian or administrator) before the retirement account owner dies.
If you prefer to use a customized beneficiary designation, make sure your trustee, custodian or administrator finds it acceptable. Not all financial institutions or qualified plans will accept customized beneficiary designations.
Check with your financial institution periodically to determine who your beneficiary is - you may need to make changes if you had a change in your family such as a birth, death, divorce or marriage.
Making a proper beneficiary designation is a very important part of your financial planning process.
After The Fiscal Cliff
What has Changed in the Estate and Gift Tax Laws?
Congress passed the American Taxpayer Relief Act of 2012’’ (“ATRA”) that made the federal estate tax exemption permanent on January 1, 2013. In a last minute move before we went over the “fiscal cliff”, in an 11th hour tax law passed by the Senate on New Year’s Eve, and by the House of Representatives one day later, mostly what Congress did was to make permanent the system that has been in effect for the past two years. I am just thankful that we now have permanence that has been missing for the last 12 years.
What’s most important to us as planners is how the “fiscal cliff” deal changes will affect our clients’ existing estate plans and whether any changes are necessary.
Most estate planning documents deal with non-tax issues, including the very valuable benefit of structuring assets to avoid the probate process at death and to provide creditor protection for beneficiaries. The Power of Attorney, Conservator, and healthcare documents are all extremely important and necessary. These documents are critical to avoid unnecessary court oversight and expense, delay, and intrusion.
What are the provisions of the ATRA that will affect my estate planning practice or clients?
Top gift, estate and GST tax rates are set at 40%. ATRA 2012 establishes the top gift, estate, and GST tax rates at 40% for gifts made and decedents dying in 2013 and thereafter. This top rate is higher than the 2012 rate of 35%, but lower than the 55% rate that would have come into effect on January 1 in the absence of legislation. This top rate will apply to transfers exceeding the exemption amounts.
Exemption amount: Permanently set at $5,000,000 per client, indexed for an inflation adjustment beginning 2012 ($5.12 million in 2012). The estate tax exclusion amount for deaths in 2013 will be $5.25 million.
Gift Tax Rate: The estate and gift taxes will remain unified, so the $5 million exemption also applies for gift tax purposes, and will follow the estate tax rate. The rate was permanently set to 40% of the amount over the exemption. In addition, the annual gift exclusion amount was raised to $14,000 per person this year.
Generation Skipping Tax Rate: The generation skipping tax exemption follows the estate tax rate. The rate was permanently set to 40% of the amount over the exemption.
Portability made permanent: Further, the deal continues the estate tax portability provisions that allow a surviving spouse to take advantage of his or her deceased spouse’s unused exemption amount. This provision allows a surviving spouse to avoid complicated estate planning by recognizing that gifts between spouses are typically tax free and allowing the exemption to be portable between both spouses. In order to utilize this, a 706 tax return MUST be filed within 9 months, so in my opinion, portability is less than optimal in many cases.
Use of the A/B/Bypass Trust: Some of the discussion since passing this legislation has focused on the use of A/B trust structure, and whether planning is better without the credit shelter trust. I still am in favor of estate planning with an A/B/C trust, especially to preserve a decedent’s share in case of a remarriage of the survivor spouse, and also to allow the flexibility of state estate tax planning. As long as the trust is flexible enough to allow the options of funding the various sub-trusts to the survivor spouse, which ours does, you still have the benefit of planning that gives the most flexibility to the survivor. We will review the provisions in our trust as a precaution
Upside to IRA Planning in ATRA
Hidden in the law — along with the typical year-end riders attached to a last minute piece of legislation, including tax breaks for NASCAR and the alternative fuel industry — were a couple of tangible impacts to the retirement world, though one may offer just short-term benefits. First, it looks as though folks hoping to roll over their regular 401(k)s to Roth 401(k)s may get an opportunity for a long-term tax break — lord knows you’re going to need one, as your taxes really are going to go up. A new provision in the package will allow 401(k), 403(b) and 457(b) participants to make the leap to a Roth 401(k) without waiting for the traditional qualifying events (retirement, reaching age 59 1/2 or changing jobs). Why? Because doing so immediately sends that tax deferral — which you’ll have to pay up front — to Washington, rather than waiting until your far-off retirement day, and Washington wants your taxes. It’s a huge opportunity for regular folks to make that Roth conversion – provided they have the financial wherewithal to pay those taxes much sooner than later.
Potential future legislation. It is important to note that there may be a push for additional revenue-raising legislation as political debates continue. The current administration has expressed its desire to limit the advantages of GRATs, grantor trusts, GST-exempt dynasty trusts, and transfers in family entities that qualify for valuation discounts. Clients who might consider employing those techniques may wish to do so sooner rather than later.
Institutes
Institutes
THE ADVANCED INSTITUTE FOR ESTATE PRESERVATION
The Advanced Institute is a professional training course that offers an extensive education on current topics affecting your estate planning practice. Each subject is presented by an expert in the industry. An example of training topics are Medicaid and Veterans Planning, When a Corporate Trustee is Necessary, The Power of Trust Provisions, IRA Trust Planning, Settling the Estate, and more. The Basic Institute course is preferred prior to attending this course.
THE BASIC INSTITUTE FOR ESTATE PRESERVATION
The Basic Institute is a professional training course that offers a solid education on living trusts, solutions for clients and higher net worth clients using advanced planning concepts, how to properly execute and fund a revocable living trust, steps for estate settlement, available marketing materials and how to use them, and where to look to potentially unlock new business and more.
TOPICS YOU WILL LEARN IN THE BASIC ESTATE PRESERVATION TRAINING INSTITUTE
The History of the Living Trust and Its Relevance Today
The Dangers of Probate
The Revocable Living Trust System
The Revocable Living Trust – 222 Provisions
Ancillary Documents in a Good Trust System
The Planning Team and Avoiding the Unauthorized Practice of Law
Client Generation, Marketing, and New Internet Systems
Advanced Planning Vehicles
The Estate Planning Client Process
Building Estate Planning Office Systems
Working with The Estate Planning Source
Putting Your Plans in Motion
Case Studies
ONLINE TRAINING & EDUCATION
Various information, training and educational material available to network professionals