IRA Tag Archives — Page 4 of 5 — Houston Estate Planning and Elder Law Attorney Blog

Don’t Bury Your Tax Returns, Use Them for Informed Financial Decisions

Published on: October 26, 2016 | By McCulloch & Miller, PLLC

Most Houstonians like to stash away our tax forms as soon as we file our taxes, but that’s a mistake.

When it comes to making financial decisions, you want to arm yourself with as much information as possible. One often overlooked source is your Form 1040, advises CNBC in “Use your tax return for more than paying taxes.” Sharing this document with your Houston estate planning attorney will allow them to get a clearer picture of your situation as well.

Lines 1-5 (Filing status). If you need to check a different box for your filing status, you should review your estate plan. If you get married or divorced, you'll need to update your will and the beneficiaries for life insurance and retirement plans.

How a Taxable Investment Account Can Be Good for Your Retirement

Published on: October 24, 2016 | By McCulloch & Miller, PLLC

We’ve been so inundated with the idea of tax-free investment accounts that the taxable investment account’s role in retirement planning is underutilized and overlooked.

If you’re like most Americans, you’ve got at least one and maybe a few retirement accounts. You like the tax benefits that come from having IRA's, 401k's, 403b's, 457b's and defined benefit plans. You know you’ll have to pay income taxes when you start taking distributions from them, except for the Roth accounts, but seeing those accounts grow makes you feel good. And if you have a Roth, you like knowing that even if you aren’t getting a deduction now, distributions will be tax free. But there are other kinds of investment accounts for retirement planning.

As Physician’s Money Digest says in “10 Reasons You Need a Taxable Investment Account,” taxable retirement accounts are ignored because we’re so focused on IRS-approved retirement accounts. But you might think about supplementing your savings with a taxable retirement account. This can be a regular, old-school investment portfolio that’s not linked to any government regulations and that you’re building for retirement.

Collecting Death Benefits from Life Insurance Policies

Published on: September 20, 2016 | By McCulloch & Miller, PLLC

If you are the beneficiary of someone’s life insurance policy, you should know that there are options as to how the policy funds, known as death benefits, can be distributed.

In most situations, the beneficiary of a life insurance policy does not have to pay income taxes on death benefits, according to a recent article in Forbes, “Are Life Insurance Proceeds Subject to Taxes?”

But depending on your situation, you might want to consider different options for that money that may be more productive in the long term. The insurance company can cut a check, but you can also have the insurer hold on to all or some of the funds and distribute them at a later date or in periodic distributions. If the money is held by the insurer, it will continue to earn interest—and that interest is taxable.

Too Old for an IRA? You Can Still Be Tax-Smart

Published on: September 9, 2016 | By McCulloch & Miller, PLLC

If you are working after 70 ½, there are still ways to save money tax-free.

Wage earners are not permitted to put money into a traditional IRA in the year they turn 70 ½ according to the Kiplinger article, “Tax-Smart Ways to Save When You're Too Old for a Traditional IRA.” But you would still be able to contribute to a Roth IRA, as long as your income in 2016 is less than $132,000 if single or $194,000 if married and file taxes jointly. In addition to the money growing tax-free in the Roth IRA with no time limit, you don’t have to take any RMDs (required minimum distributions).

You can contribute up to the amount you earned for the year (your net income from self-employment), with a maximum of $6,500—that’s $5,500 for everyone under age 50, plus $1,000 for people age 50 and older. If your earnings are well over the $6,500 maximum, you can just contribute that amount. However, if your earnings are near or under the maximum, you’ll need to know what is considered compensation and how to calculate your allowed contribution.

What You Don’t Know About Estate Planning Could Hurt Your Family

Published on: August 29, 2016 | By McCulloch & Miller, PLLC

Think of an estate plan as a love letter to your family after you have passed.

You’d be surprised at how many people you know don’t have a will or an estate plan in place. They may be among the many who have an unspoken belief that if they don’t have a will, they won’t die. That would be terrific—if it were true. Or, they think that only people who are wealthy or have complex tax issues require estate planning.

The Sabetha (KS) Herald’s recent article, “Understanding the estate planning process,” says that both of these ideas are wrong because your level of wealth and the ultimate tax consequences of your estate take a back seat to the planning and care of your family and other heirs.

Recent Changes in Estate Planning Laws May be Cause for Review of Your Houston Estate Plan

Published on: May 13, 2016 | By McCulloch & Miller, PLLC

Recent change in tax laws have many people rethinking their estate plans. Also, changes in the normal course of life make it a good idea for persons with estates that range from small to large to review wills, trusts, powers of attorney and beneficiary designations of insurance, IRAs, and other interests to achieve the most beneficial tax advantages.

In the beginning of January 2013, Congress made permanent the ability of a person to acquire his or her deceased spouse’s unused estate tax exemption through portability, and approved the larger estate and gift tax exemption of $5.45 million (for 2016) per person adjusted every year for inflation. For a married couple the exemption is potentially double that amount, or $10.9 million (for 2016). We believe that it is important for you to know that you may have an alternative to simplify your current trust structure without paying any estate tax, and in fact, for your beneficiaries to pay less income tax.

You may have an “AB Trust” or “ABC Trust,” or a Family Trust that creates a Decedent’s Trust (also referred to as a “Bypass Trust”) and a Survivor’s Trust on the death of the first of you or your spouse. The recent legislation makes it useful to examine whether such trusts should be changed to simplify their operation. The trust could be simplified by eliminating the need to create new trusts if one spouse passes away survived by the other. Simplification of a trust would result in several benefits:

Retirement Planning: Use Caution on Houston’s Bumpy Roads

Published on: August 17, 2015 | By McCulloch & Miller, PLLC

With two-thirds of Americans experiencing disruptions to their retirement planning resulting from divorce, major illnesses, unemployment or business troubles, the road to retirement has become bumpier than ever, according to a new TD Ameritrade survey. The challenges add up to $2.5 trillion in lost retirement savings. The news is gloomy, but knowing that there are and will be problems on the road to retirement reminds us that planning should include these kinds of problems, and responding to financial disruption in a timely manner is necessary for successful retirement planning.

The website Real Deal Retirement gives us three ways to stay on track during our journey toward retirement. The article, titled “Retirement Interruptus: 3 Ways To Prevent Disruptions From Derailing Your Retirement Plans,”gets right to the point:

1. Consider Alternate Retirement Realities. Remember that an assessment of your retirement prospects from a retirement calculator, doesn’t mean that your retirement’s going to go precisely to that plan. Just like the weather forecast, things can change. “The best-laid plans of mice and men…”

Tips for Houston Families Caring for Aging Parents

Published on: January 26, 2015 | By McCulloch & Miller, PLLC

Adult children who become caregivers often pay a steep price. However, with some smart strategies, you can avoid sabotaging your financial future.

What can you do ahead of time to help ease the financial burden of caring for your aging parents?

Look into potential tax breaks.

Guard Your Houston Heirs From IRA Snares

Published on: May 8, 2014 | By McCulloch & Miller, PLLC

Worried about your adult children blowing through their inheritance? Two strategies can help holders of individual retirement accounts curb an heir’s impulse to “cash out.”

You may have many assets to leave behind for your heirs. However, an IRA is unique enough to be easily squandered in taxes, as MarketWatch noted in a recent article appropriately titled “Protect your heirs from an IRA tax trap.”

IRAs are some of the most common high-value assets. That noted, because they are such unique accounts, there are some equally unique rules regarding inherited IRAs that are either amenable to diligent financial planning or a short-term high of a cash-out.

Houston Families and Spousal IRA Heirships

Published on: May 2, 2014 | By McCulloch & Miller, PLLC

A spouse who inherits an IRA has a choice. The surviving spouse can move the account into an inherited IRA to keep the tax shelter. Or she can choose to roll the account into her own IRA.

There are some unique rules that go into effect when an IRA is bequeathed and inherited. If a spouse is inheriting the IRA, they have extra leeway that’s worth putting to good use.

The sorts of things an IRA inheriting spouse ought to think about don’t make the headlines quite as often. However, DailyFinance offered a helpful guide a short time ago in an article titled “When A Spouse Inherits An IRA.”