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

Worried About Estate Taxes? Don’t Die in These States Next Year!

Published on: September 29, 2014 | By McCulloch & Miller, PLLC

Moving to New York to avoid state death taxes? “When your bordering state is telling you, ‘Come on over!’ the pitch is compelling,” McManus says. “If New York has a more welcoming tax scheme, then people will say, ‘Let’s call me a New York resident.’” McManus says that he and his wife might make the New York move in retirement themselves; they already have a place in the West Village they rent out for now.

Would your state's death tax prompt you to move to another state? You wouldn't be the first to consider relocation.

The number of death tax jurisdictions is 19 states plus D.C. at present. However, there are several states making changes for 2015. These states are lessening the death tax liability by increasing the exemption dollar threshold, figuring in inflation, and eliminating “cliff” provisions that tax the first dollar of an estate.

Partial Roth IRA Conversions May Reduce Tax Impact for Houston Investors

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

Today, ordinary income plus various other taxes could boost the effective tax rate on those second-level RMDs well over 40%. Who knows what tax rates might be in effect when current clients eventually pass their IRAs to future generations?

Some individuals choose to have partial Roth IRA conversions so they remain in their current income tax bracket and decrease other taxes and charges, according to a recent article in Financial Planning titled "Estate Planning: Smart Roth Conversion Trick." Along with a Medicare surtax and deduction phase-outs, Medicare Part B premiums are also part of the mix.

Medicare enrollees typically pay about $105 monthly for Medicare Part B. This covers doctor bills and some other medical expenses. However, seniors who have a modified adjusted gross income (MAGI) above $85,000 (or $170,000 on joint returns) will pay anywhere from roughly $145 to $335 a month for that same coverage. This is because Roth IRA conversions increase an individual's MAGI. The original article advises those in this situation to take an annual series of partial conversions now to thereby limit future taxes, as well as “stealth” taxes like extra Part B premiums.

Ruling by Supreme Court Changes IRA Safety

Published on: August 12, 2014 | By McCulloch & Miller, PLLC

A ruling by the U.S. Supreme Court holding that assets contained in an inherited individual retirement account (IRA) don’t qualify as retirement funds for the purposes of bankruptcy exemption, has turned the estate planning community on its head.

Prior to a recent US Supreme Court ruling, inherited IRAs were treated as retirement savings and not as current income. It was thought that if you made an heir a beneficiary of your IRA, the money in the IRA would be safe from your heir's creditors after you passed away. Well, those inherited IRAs may now be fair game to creditors.

As Insurance News Net points out, in an article titled “Court Decision Has Implications for Estate Planning,” the full implications of this court ruling are not yet clear. The court's decision leaves open the possibility that a surviving spouse named as the beneficiary of an IRA might still be able to treat it as retirement savings, but the court did not address that issue. For other beneficiaries, however, it is clear that in most states, inherited IRAs will be much easier for creditors to claim in bankruptcy proceedings or otherwise. Such an inheritance will be treated as income, not retirement savings.