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How a Charitable Remainder Trust Works

The least popular beneficiary is almost always the federal government. Most people are concerned that their estate will need to pay taxes and do what they can through estate planning to keep federal estate tax liability to a minimum. However, with federal estate and gift tax exemptions at $11.58 million per person this year, and twice that when properly used with the spousal exemption, most people don’t need to worry about the federal estate tax, explains The News Enterprise in the article “New federal law resurrects Charitable Remainder Trust.”

The passage of the SECURE Act, effective January 1, 2020, made big changes in how we need to plan for taxes for beneficiaries. Federal estate and gift tax exemptions did not change, but anyone who inherits a retirement account is likely to find fewer options than before the SECURE Act.

Charitable remainder trusts have been used for many years to avoid high capital gains taxes on appreciated assets. Appreciated assets are placed into trusts and no taxes are due on the transfer.  The donor also gets a charitable tax deduction. The amount in the trust grows, while paying out a small amount to beneficiaries in installment payments.

With the passage of the SECURE Act, non-spousal beneficiaries, with certain exceptions, must withdraw the entire amount of the qualified retirement account within ten years. Generally, beneficiaries may not roll the account into their own qualified account, and there are no required annual distributions. However, there’s a ten-year window to empty the account. Taxes are due on every withdrawal, whether it takes place over ten years or as a single withdrawal.

By using a CRT, the full amount of the account may be transferred into the CRT, no taxes are due, and the donor (or the donor’s estate) gets a charitable deduction.

The trust is simply an instrument created, so that a beneficiary may receive regular payments, which may include the donor, beneficiaries or multiple beneficiaries, over the span of their lives, or in a set number of years, with the remainder interest of at least ten percent of the initial contribution paid to a qualified charity at the end of the trust.

This effectively creates a stretch for the IRA, with withdrawals being taxed to the beneficiary, over a longer time span. With only ten percent being required to be donated to a charity, those who plan on making a donation to a charity anyway receive a benefit, and their beneficiaries can receive a lifetime income stream.

Speak with your estate planning attorney to learn how a CRT could be part of your estate plan.

Reference: The News Enterprise (June 2, 2020) “New federal law resurrects Charitable Remainder Trust”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Are You Making the Most of the SECURE and CARES Acts?

The SECURE Act made a number of changes to IRAs, effective January 1, 2020. It was followed by the CARES Act, effective March 27, 2020, which brought even more changes. A recent article from the Milwaukee Business Journal, titled “IRA planning tips for changes associated with the SECURE and CARES acts,” explains what account owners need to know.

Setting Every Community Up for Retirement (SECURE) Act

The age when you have to take your RMD increased from 70½ to 72, if you turned 70½ on or before December 31, 2019. Younger than 70½ before 2020? You still must take your RMDs. But, if you can, consider deferring any distributions from your RMD, until you must. This gives your IRA a chance to rebound, rather than locking in any losses from the current market.

Beneficiary rules changed. The “stretch” feature of the IRA was eliminated. Any non-spousal beneficiary of an IRA owner who dies after Dec. 31, 2019, must take the entire amount of the IRA within 10 years after the date of death. The exceptions are those who fall into the “Eligible Designated Beneficiary” category. That includes the surviving spouse, a child under age 18, a disabled or chronically ill beneficiary, or a beneficiary who is not more than ten years younger than the IRA owner. The Eligible Designated Beneficiary can take distributions over their life expectancy, starting in the year after the death of the IRA holder. If your estate plan intended any IRA to be paid to a trust, the trust may include a “conduit IRA” provision. This may not work under the new rules. Talk with your estate planning attorney.

IRA contributions can be made at any age, as long as there is earned income. If you have earned income and are 70 or 71, consider continuing to contribute to a Roth IRA. These assets grow tax free and qualified withdrawals are also tax free. If you plan on making Qualified Charitable Distributions (QCD), you’ll be able to use that contribution (up to $100,000 per year) from the IRA to offset any RMDs for the year and not be treated as a taxable distribution.

Coronavirus Aid, Relief and Economic Security (CARES) Act

The deadline for contributions for traditional or Roth IRAs this year is July 15, 2020. The 2019 limit is $6,000 if you are younger than 50 and $7,000 if you are 50 and older.

RMDs have been waived for 2020. This applies to life expectancy payments. It may be possible to “undo” an RMD, if it meets these qualifications:

• The RMD must have been taken between February 1—May 15 and must be recontributed or rolled over prior to July 15.
• RMDs taken in January or after May 15 are not eligible.
• Only one rollover per person is permitted within the last 12 months.
• Life expectancy payments may not be rolled over.

Individuals impacted by coronavirus may be permitted to take out $100,000 from an IRA with no penalties. They are eligible if they have:

• Been diagnosed with SARS-Cov-2 or COVID-19
• A spouse or dependent has been diagnosed
• Have experienced adverse consequences as a result of being quarantined, furloughed or laid off or having work hours reduced due to the virus, are unable to work because of a lack of child care, closed or reduced hours of a business owned or operated by the individual or due to other factors, as determined by the Secretary of the Treasury.
• Note that these distributions are still taxable, but the income taxes can be spread ratably over a three-year period and are not subject to the 10% early distribution penalty.

Keep careful records, as it is not yet known how any of these distributions/redistributions will be accounted for through tax reporting.

Reference: Milwaukee Business Journal (June 1, 2020) “IRA planning tips for changes associated with the SECURE and CARES acts”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Don’t Shrink Your Estate with Last Minute Tax Planning

In the best-case scenario, you’d start talking with your estate planning attorney early on about your overall goals and the various tools available to minimize tax liability and transfer wealth to the next generation. Whether your estate is modest or significant, the article “A Recipe for Risk—Last-Minute Tax Planning for Estates” from The Legal Intelligencer explains how a last-minute plan failed on a grand scale. A recent memorandum opinion from the U.S. Tax Court provides a cautionary tale.

Howard Moore owned a large amount of property and ran a successful farm. He was admitted to the hospital late in 2004, was discharged to hospice and told he only had six months to live. He created an estate plan that included a family limited partnership (FLP), a living trust, a charitable lead annuity trust, a trust for the adult children, a management trust that acted as the general partner of the family limited partnership and an “Irrevocable Trust No. 1” that was created to act as a conduit for the transfer of funds from the FLP to a charitable foundation.

The primary focus of the plan was to transfer the farm to a living trust and then to transfer 80% of the farm property to the FLP. The management trust was to serve as a partner to the FLP, with the living trust owning almost all the limited partnership interests and with each of the decedent’s children owning a 1% partnership interest. The FLP was to offer protection against liabilities from the use of pesticides, potential bad marriages, creditors and the fact that the family was a bit dysfunctional and would need to work together to manage the FLP. The FLP had many transfer restrictions and the limited partners were not given any rights to participate in business management or operational decisions regarding the FLP.

The trust known as “Irrevocable Trust No. 1” was nominally funded at the time of the decedent’s death and received funding from the FLP. Those funds, in turn, were transferred to the charitable trust to gain a charitable deduction by the estate. Just before he died, Moore used FLP funds to make large transfers to his children that were designated as loans. He also made outright gifts to the children and to one grandchild.

The estate filed an estate tax return and a gift tax return after Moore’s death. The IRS issued a notice of deficiency for nearly $6.4 million and the case went to tax court. The U. S. Tax Court agreed with the IRS’ findings. The defense of the estate plan, the tax court maintained, was form over substance and the only reason for the estate plan and the numerous transactions was to save estate taxes.

There were a lot of hurdles in this case, in addition to the short time period for the estate plan to have been created. At the time of the decedent’s hospitalization, the sale of the farm to a neighbor was being negotiated. A contract to sell the farm was executed with days of transferring it to the living trust. There were numerous transfers and distributions made between trusts and the FLP, and the court concluded that all decisions about the FLP after its formation were made unilaterally by the decedent. An FLP is supposed to function as a true partnership. Many other issues and errors occurred in the rush to have this estate structured in such a short period of time.

Had Moore engaged in planning five or ten years earlier, there would have been time to create a plan in which both the substance and execution of the plan were sound and the family would have been able to save millions of dollars in taxes. By waiting until his death was imminent, the plan attempted to establish transfer requirements without the opportunity to execute them properly.

Reference: The Legal Intelligencer (May 18, 2020) “A Recipe for Risk—Last-Minute Tax Planning for Estates”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Why Gifting during Volatile Markets Makes Sense

Gifting assets to a trust for children or grandchildren is often an important part of an estate plan. The recent article “Is Now a Good Time to Make a Gift?” from The National Law Review takes a close look into the strategy of placing non-cash assets into a trust, without exceeding the annual gift tax exclusion amount or the Federal Gift Tax Exemption. If those assets increase in value later, the increases will further enhance the gift for beneficiaries.

Taxes on gifts made to a trust to benefit children and grandchildren are based primarily on the value of the gift. Annual exclusion gifts, that is, transfers of assets or cash that do not exceed the annual gift tax exclusion, are currently set at $15,000 per recipient per year. A married couple may give up to $30,000 per person in any calendar year. Many annual exclusion gifts do not require a Federal Gift Tax Return (Form 709), although it would be wise to speak with an estate planning attorney to make sure that this applies to you, since every situation is different.

Annual exclusion gifts are one way to reduce the overall value of the estate, but they do not reduce the Federal Estate Tax Exemption of the person making the gift.

Gifts in excess of the annual exclusion amount may still avoid gift taxes, if the person making the gift applies their gift tax exemption by filing IRS Form 709. The gift tax exemption is unified with the estate tax exemption, at $11.58 million per person in 2020. Gifts that are bigger than the annual exclusion of $15,000 per year, reduce the $11.58 million exemption for purposes of both the gift tax and the estate tax.

For example, if a person were to make taxable gifts of $1.0 million to a child in 2020, their lifetime gift tax and estate tax exemption will be reduced to $10.58 million. If that person were to die in 2020 when the applicable estate tax exemption is $10.58 million, then only estate assets in excess of the exemption will be subject to estate tax.

Given the uncertainly of the gift and estate tax exemptions, management and timing of these gifts is particularly important. If no legislative action occurs, these generous estate and gift tax exemptions will sunset at the end of 2025. They will return to the 2010 level of $5.0 million, indexed for inflation.

The exemptions need to be carefully used and budgeted, because federal estate tax starts at 18% and rises to 40% on all amounts over the exemption. Like the exemption, these rate rates may be changed by future elections and/or tax law changes.

If you are concerned about an estate becoming taxable, the current decline in asset values makes this a good opportunity to transfer more of the estate into trust for beneficiaries. The transfers can decrease the impact of a reduction in the exemption amount, as well as any changes to the tax rates. The currently reduced value of stocks and many other investments may also present an opportunity to reduce future taxes.

The best way forward would be to have a conversation with an estate planning attorney to review your overall estate plan and how moving assets into trusts during a time of lowered value could benefit the estate and its beneficiaries.

Reference: The National Law Review (April 10, 2020) “Is Now a Good Time to Make a Gift?”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Charitable Giving and Your Estate Plan

Americans are a country of generous people. We give to organizations that we feel connected to, and we give to charities that we feel are important. We also give to honor our loved ones, to make life better in our communities and to help when disaster strikes.

Most people don’t give to charity purely for the tax benefits, but charitable giving has long been a benefit of lowering income taxes during our lifetimes, as well as helping minimize estate taxes when we die, says the article “5 Ways to Incorporate Charitable Giving into Your Estate Plan” from Kiplinger. Therefore, if you are charitably minded, why not achieve the most tax-savings you can? Here are five ways to do this.

Appreciated Stock. Gifts of publicly traded stock that has grown or appreciated in value is a good way to support a charity while you are living. If you sell appreciated stock, you will need to pay capital gains tax on the appreciation. However, if you donate appreciated stock to a charity, you’ll receive a charitable income tax deduction equal to the full market value of the stock at the time of the gift. That avoids capital gains taxes. You get the benefit on the appreciated amount, without having to sell it. The charity can, if it wants, sell the stock without paying any capital gains taxes, because registered nonprofits are tax exempt.

Charitable Rollovers. If you are older than 70 ½, you may donate up to $100,000 per year to charities directly from your IRA. This is known as a Qualified Charitable Rollover, or a QCD. The QCD counts towards any Required Minimum Distributions (RMDs) that you need to take from your IRA annually. Under the recently passed SECURE Act, in the future RMDs must be taken by December 31, 2020, after the account owner celebrates their 72^nd birthday. Because RMDs are taxable income, they are taxed at ordinary income rates.

By donating through a QCD, you can support a charity, fulfill your RMD requirement and exclude the amount that you donate from your taxable income. For those who don’t need their RMDs, that’s a win-win situation.

Bequest by Will or Revocable Trust. A more traditional way to support a charity, is to leave an amount in your will or revocable trust. The bequest is language in your will or trust that states the amount you want to leave to the charity, clearly identifying the charity you want to receive the funds, and if you want, stating the purpose that you’d want the charity to use the funds. An important point: make sure that you use the legally accurate name of the charity to avoid any confusion. This is a common error that causes no many problems for charities.

Consider also giving a donation that can be used for a charity’s “general purpose.” This lets the charity decide where to best allocate your donation, rather than tying the money to a specific program. If you chose to list a specific purpose, meet with the development office or the executive director at the charity to ensure that they are able to fulfill that desire. Otherwise, the charity may need to refuse the bequest.

Name a Charity as the Beneficiary of Retirement Accounts. This can be done by naming the charity as a beneficiary on the account documents. Be sure to use the legally correct name of the charity. The charity will be able to withdraw funds from the retirement account without paying taxes. People who receive funds from retirement accounts pay income tax rates on distributions, but charities do not. You may want to donate retirement account funds to charities, and non-taxable assets to heirs.

Charitable Remainder Trusts. This is a way to help the charity and provide for heirs. Your estate planning attorney would create a Charitable Remainder Trust (CRT) and names the CRT as the beneficiary of an IRA. A CRT is a “split interest trust,” where a person receives annual payments for the CRT for a set period of time. When the person or charitable organization’s interest in the CRT ends, the remaining funds are distributed to the charity of your choosing. There are very strict rules about how CRTs are structured, including the percentages that the charity must receive. An estate planning attorney will be able to create this for you.

Reference: Kiplinger (March 2, 2020) “5 Ways to Incorporate Charitable Giving into Your Estate Plan”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

How Does the SECURE Act Change Your Estate Plan?

The SECURE Act has made big changes to how IRA distributions occur after death. Anyone who owns an IRA, regardless of its size, needs to examine their retirement savings plan and their estate plan to see how these changes will have an impact. The article “SECURE Act New IRA Rules: Change Your Estate Plan” from Forbes explains what the changes are and the steps that need be taken.

Some of the changes include revising wills and trusts which include provisions creating conduit trusts that had been created to hold IRAs and preserve the stretch IRA benefit, while the IRA plan owner was still alive.

Existing conduit trusts may need to be modified before the owner’s death to address how the SECURE Act might undermine the intent of the trust.

Rethinking and possibly completely restructuring the planning for the IRA account may need to occur. This may mean making a charity the beneficiary of the account, and possibly using life insurance or other planning strategies to create a replacement for the value of the charitable donation.

Another alternative may be to pay the IRA balance to a Charitable Remainder Trust (CRT) on death that will stretch out the distributions to the beneficiary of the CRT over that beneficiary’s lifetime under the CRT rules. Paired with a life insurance trust, this might replace the assets that will ultimately pass to the charity under the CRT rules.

The biggest change in the SECURE Act being examined by estate planning and tax planning attorneys is the loss of the “stretch” IRA for beneficiaries inheriting IRAs after 2019. Most beneficiaries who inherit an IRA after 2019 will be required to completely withdraw all plan assets within ten years of the date of death.

One result of the change of this law will be to generate tax revenues. In the past, the ability to stretch an IRA out over many years, even decades, allowed families to pass wealth across generations with minimal taxes, while the IRAs continued to grow tax tree.

Another interesting change: No withdrawals need be made during that ten-year period, if that is the beneficiary’s wish. However, at the ten-year mark, ALL assets must be withdrawn, and taxes paid.

Under the prior law, the period in which the IRA assets needed to be distributed was based on whether the plan owner died before or after the RMD and the age of the beneficiary.

The deferral of withdrawals and income tax benefits encouraged many IRA owners to bequeath a large IRA balance completely to their heirs. Others, with larger IRAs, used a conduit trust to flow the RMDs to the beneficiary and protect the balance of the plan.

There are exceptions to the 10-year SECURE Act payout rule. Certain “eligible designated beneficiaries” are not required to follow the ten-year rule. They include the surviving spouse, chronically ill heirs and disabled heirs. Minor children are also considered eligible beneficiaries, but when they become legal adults, the ten year distribution rule applies to them. Therefore, by age 28 (ten years after attaining legal majority), they must take all assets from the IRA and pay the taxes as applicable.

The new law and its ramifications are under intense scrutiny by members of the estate planning and elder law bar because of these and other changes. Speak with your estate planning attorney to review your estate plan to ensure that your goals will be achieved in light of these changes.

Reference: Forbes (Dec. 25, 2019) “SECURE Act New IRA Rules: Change Your Estate Plan”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

How an Experienced Estate Planning Attorney Helps People

People turn to estate planning attorneys, when they are ready to create a set of instructions for what they would like to happen to their assets when they die, explains Vents Magazine’s recent article, “Understanding What an Estate Planning Attorney Does.” The estate planning attorney creates a will, also known as a last will and testament to accomplish this, but that’s just part of what they do.

An estate planning attorney also helps to plan for incapacity, when a person cannot speak for themselves because of an injury or an illness. She also helps you understand estate taxes.

An estate planning attorney will also help to make certain that all of your savings and property are safe and distributed through the proper legal processes.

Estate planning attorneys assist with the power of attorney and health care directives. These documents allow you to designate an individual to decide issues on your behalf, in the event that you become mentally incapable of making decisions for yourself. They can also help you with a guardian who will look after your estate.

It’s important that you select the right estate planning attorney to execute the legal process, as you’ve instructed in your estate plan. You should only retain an attorney with experience in this field of law because other legal counsel won’t be able to help you with these issues—or at least, they may say they can, only to find out later that they’re not experienced in this area.

You also want to feel comfortable with your estate planning attorney because you must disclose all your life details, plans, and estate issues, so she can create an estate plan that’s customized to your circumstances.

By selecting an experienced estate planning attorney, you save your family from unnecessary stress and costs. If there is no will, the entire estate is handled by the courts, which also takes a considerably longer time than if a will was properly prepared. If no estate plan exists, there may also be additional taxes.

Reference: Vents Magazine (December 12, 2019) “Understanding What an Estate Planning Attorney Does”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Can Inheritance Taxes For A Step-Grandchild be Avoided?

New Jersey is one of several states that still have an inheritance tax, reports an article from nj.com, “How can I avoid the inheritance tax for step-grandchildren?” Whether or not an inheritance tax is levied, depends upon the level of kinship between the decedent and their beneficiaries. There are four categories of kinship.

Most inheritors fall into Class A. This category includes a spouse, child, parent, grandparent, stepchild, and grandchild. The next most common category is Class C—siblings and daughters-in-law or sons-in-law, and the surviving spouse of a deceased child are included here. Class E beneficiaries include charities, religious institutions and other exempt organizations. Finally, there’s Class D. These beneficiaries includes anyone who’s not a member of another class. In case you’re wondering, there’s no longer a Class B.

Class A beneficiaries will not see any inheritance tax. For Class C, the first $25,000 is exempt and the rate on amounts in excess of that begins at 11% and goes up to 16%. Class D rates range from 15 to 16%. There’s no inheritance tax for Class E.

Step-grandchildren are considered Class D beneficiaries, despite the fact that grandchildren and stepchildren are Class A beneficiaries. You can avoid the tax, by leaving life insurance death benefits to a step-grandchild, because these benefits aren’t subject to New Jersey’s inheritance tax. If the step-grandchild is the stepchild of your child or the child of your stepchild, leave the bequest to your child or your stepchild and make an unenforceable request that she use the bequest for that step-grandchild.

Another option is to make a gift to the step-grandchild, while you’re living. If the gift is made more than three years before your death, then it won’t be subject to the inheritance tax. However, if it’s within that three-year period, there’s a presumption that the gift was made in contemplation of death, so it will be subject to inheritance tax.

You could avoid this, by making a lifetime gift to your child or stepchild, even within the three-year period preceding death, and request that they use it for the benefit of the step-grandchild. The only issue here is that it's not an enforceable obligation. Otherwise, the gift will be deemed to have been made to the step-grandchild and subject to the three-year gift in contemplation of death rule.

Real estate property located outside of New Jersey that is owned by a New Jersey resident might be a good asset to leave to a step-grandchild. New Jersey’s inheritance tax is not applied to out-of-state real estate.

Reference: nj.com (October 31, 2019) “How can I avoid the inheritance tax for step-grandchildren?”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

The Downside of Moving Retirement Money to a Roth

The question to ask yourself about retirement savings and taxes is simply this: when do you want to pay taxes? You can pay taxes during retirement with a traditional IRA. Or, you can roll your IRA money into a Roth IRA and pay taxes now. However, is there a reason not to put all of your money into a Roth IRA, besides the immediate taxes?

CNBC’s recent article, “Moving all your IRA money to a Roth means losing some tax benefits,” says that those lost tax benefits generally relate to medical expenses, charitable contributions and business losses. By contrast, if you leave too much in the IRA, the result may not be good. You may have higher required minimum distributions and taxes.

Roth IRAs grow tax free and withdrawals generally are also untaxed. They also have no lifetime required minimum distributions, or RMDs. However, traditional IRAs have some potential tax benefits that are gone for good, once the money is moved.

The primary concept in managing taxes in retirement is that you want to get as much money out of your accounts at the lowest possible cost. When you roll over money from a traditional IRA to a Roth, the amount moved is taxed as ordinary income. As a result, you should complete the rollover when you’re in as low a tax bracket as possible. This means tax-free income available down the road, but it also means you’ll have already paid taxes on the rollover. Thus, there’s no opportunity to reduce your rate further. However, if you leave too much in the IRA, the result may not be good. If you think that you might have these future expenses, then it might make sense to keep money in the traditional IRA.

Medical expenses. These is usually a major expense for older Americans and doesn’t include the cost of long-term care. However, a tax break for medical expenses is one of the few remaining deductions available to individuals, since the new tax law in 2018. It’s limited to the amount that exceeds 10% of your adjusted gross income and you must itemize your deductions to take advantage of it. However, those with high medical bills can potentially reduce their taxes by applying it. To take the deduction, you must have taxable income to weigh it against. So, if much of your income is coming from a Roth IRA tax-free, you could be restricted in whether you can take advantage of the break. If you took money from an IRA (whose withdrawals are taxed as ordinary income) to cover those health costs, you could use the medical deduction against that withdrawal. This could result in paying less in taxes than what you had paid by rolling that money to a Roth.

Qualified charitable distributions. If you give money to charity each year, keeping money in your traditional IRA to make those donations could be wise, because contributions made through qualified charitable distributions — funds sent directly to the charity from a traditional IRA — are excluded from your taxable income. However, the tax break for charitable contributions can only be used if you itemize your deductions, and generally, a deduction isn’t as valuable as an income exclusion. Note that this strategy is only available to IRA owners and beneficiaries who are age 70½ or older. Since that is the age when RMDs kick in, the move could reduce your tax liability on the RMD to zero. If your RMD is $5,000, but you give $5,000 to charity anyway, do the qualified charitable distribution, and you don’t have to pick up any of the income.

Business losses. These can only be claimed on your tax return, if you have income to claim them against.

General tax considerations. No matter your overall income, any amount that falls into each of seven defined brackets is taxed at a specific rate. Therefore, the more income you can get taxed at those lower rates, the better. If you could leave some money in the IRA to soak up some of those lower tax rates in the future, you may pay less in taxes on the money than if you converted it.

Tax rates may be low now, but they are going to revert back to pre-2018 levels at the end of 2025, when the current tax law sunsets. So chances are good that after 2025, they’ll be higher.

The way to get the most from your money, is to minimize your taxes, especially in retirement.

Reference: CNBC (November 27, 2019) “Moving all your IRA money to a Roth means losing some tax benefits”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

How Can You Get Ready to Retire?

Enjoying these so-called “golden years” is a lot easier with a lot of gold in your nest egg. That’s not so easy for everyone to accomplish.

According to the Federal Reserve, 26% of non-retirees say they have nothing saved for retirement. Zero.

CNBC’s recent article, “Make these 6 moves now to be financially prepared for retirement,” provides the steps you should take right away to start building your retirement savings.

1. Put on your thinking cap. Picture as accurately as you can what your ideal retirement will look like—and what it will cost. Use an online retirement savings calculator to help you see if you’re on the right spending and savings path.

2. Get a checkup. Get educated about Medicare and weigh the alternatives for long-term care, such as long-term care insurance.

3. Be sure your estate plan is up to date. See your attorney and be sure that all your estate documents work with the laws of the state where you’re retiring. Look at any possible concerns about estate taxes. Keep beneficiary designations up to date because, regardless of what’s said in your will, beneficiaries listed on specific accounts, such as IRAs, will inherit those funds.

4. Think of charities now. With more time on your hands, consider selecting a cause or two. You can lend a hand or make a donation.

5. Review your portfolio. You may have your money primarily deposited in a target-date fund that keeps your investment mix of stocks, bonds, cash, and other assets appropriate for your retirement time horizon. However, it’s a good idea to make certain that your asset allocation is where you want it. Remember that portfolio growth and market shifts can change your allocation at any time, and the closer you get to actual retirement—or if you’re already there—the more conservative an allocation you’ll want to have.  You should also monitor the account fees you’re paying in funds and consider lower-cost alternatives.

6. Build a team of professionals. There are three people who you need to have on your side: an estate planning attorney, a CPA and a financial advisor.

Reference: CNBC (November 11, 2019) “Make these 6 moves now to be financially prepared for retirement”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899