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IRA, Estate, Inheritance, and Tax Planning, also known as Financial Planning
IRA Account Planning
Although the planning and investment
management of IRA accounts fall under several of the other pages on the site, IRA accounts themselves have some very particular,
and if not handled correctly, expensive tax issues
Some specific IRA planning steps are:
1. Income planning
strategies to minimize tax bills (including taking advatage of NUA if possible)
2. Compliance with Required Minimum Distribution
rules (Violations incur a 50% penalty)
3. Assisting in the often complex decision for spouses to inherit vs. rolling-over
a deceased spouse's IRAs
4. Tax planning strategies to help your beneficiaries with the Income with Respect to a
Decendant (IRD) tax
5. Working with 401(k) accounts in efforts to overcome the inability for non-spouse benefeciaries
to stretch required distributions (and therefor have higher and immediate tax consequences)
6. Reviewing and Educating
on the default beneficiary designations as dictatied by the plan document
Estate Planning
Typically when people think of estate
planning, they think of estate taxes and the very rich. This may impact more people than you would think. Under
the current tax code, the excludable amount for 2008 is $2,000,000. Next year it goes up to $3,500,000, then $0
for 2010 and then back to $1,000,000 for 2011 and beyond. When you add up all your assets (and don't forget to count
in your real estate), then factor in future growth of those assets, many more people than you would think will have some sort
of estate tax issue.
Some other issues that may cause estate tax planning issues are that as of the writing of
this, 18 states have decoupled their own death taxes from the federal taxes. In addition, many people have purchased
second homes for vacations or to spend the winter in a less harsh environment. An unplanned estate such as these will
have to probate assets (and spend more money to hire attorneys) in all the states where property is owned.
Inheritance Planning
With a larger portion of families
having some sort of "blend" to them due to divorce, early widow-hood, re-marrying, etc., inheritance planning focuses
on where you want your assets to go after your passing. Obviously there will be tax issues, but equally important is
to make sure that you don't accidentally disinherit or significantly short change an intended beneficiary(s).
One area that is often over-looked is the IRA beneficiary designations. Many people think "it's covered
in my will, or covered in my trust." The beneficiary listed (or not listed) on the IRA or 401(k) account ALWAYS
over-rides what is specified in a will or trust. Not only could this cause HUGE tax consequences, but as I said earlier,
can disinherit an intended beneficiary(s).
Another item that may need planned is for that child (or their spouse)
who needs protected from themselves. It would be a shame for the assets you worked hard to grow be wasted away in such
a short time after your passing because an adult child can't get out of their own way.
Tax Planning
This is taking a look at your entire financial
situationa, and with your accountant, planning where possible so that extra and unnecessary taxes are not paid. When
you consider all the types of taxes there are (income, estate, gift, inheritance, AMT, FICA, Social Security, etc.) it's
easy to see that without very focused planning, one can give more than is required to the state and federal government.
Some of the techniques used may be family limited partnerships, income shifting, stock option planning, and various
types of trusts. Some of these areas will require the use of an attorney with knowledge specific to these strategies.
Fees
Fees for these services are taken on a case by
case basis, however for the typical Household that is Married Filing Jointly, the cost is around $1500. Should you own
rental property, one or more businesses, or have a much more complex situation, the fee will typically be in the $2500-$5000
range.
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