The St. Louis Rams & Beneficiary Designations

When the rules are in writing, you have to follow them. Unless you’re the NFL. 

I am a St. Louis Rams fan. Loyal from the time they arrived in St. Louis after failing to get a new stadium in Los Angeles. Like all Rams fans, I was really upset when they left St. Louis, even after witnessing a decade of historically bad football.

For those unfamiliar with the situation, the lease the Rams had allowed them to relocate to Los Angeles this past January. The Governor of Missouri appointed a task force to try and negotiate a new, long-term stadium deal to keep the Rams in St. Louis. The task force ultimately came up with an actionable proposal on a new riverfront stadium for the Rams.

But after the proposal was submitted, the NFL’s assigned committee recommended that teams in San Diego and Oakland (two cities that essentially had no stadium proposals) be allowed to move to L.A., instead of the Rams. Throughout the task force’s work, it appears the Rams’ ownership was uncooperative. They did not meet with the task force, talk to the media, or talk to the fans. All of this was in apparent disregard of the NFL’s relocation guidelines requiring good-faith negotiations and attempts to maximize fan support in their current home community.

In spite of all this, the league allowed the Rams to relocate to L.A.

It seems laughable to suggest that the NFL relocation guidelines were followed. An owner who refuses to take part in negotiations is not negotiating in good faith, and an owner who refuses to talk to fans or the media for four years after his intention to move has become public, is not operating in a manner that would maximize fan support.

As the Rams made the number one pick in the NFL draft this year, the fans in Los Angeles got to cheer on their new quarterback. I thought to myself: based on the NFL’s own guidelines, he should have been St. Louis’ new quarterback. I didn’t like seeing something end up in the wrong place because it seems unfair. 

Estate Planning Involves Written Rules That Have to be Followed

Unfortunately, we see unfair things all the time in our firm. In the estate-planning world, unlike the club of pro football owners, we can make written rules and trust that they will be followed. Unfortunately, too often people don’t pay close attention to the rules that are put in place through their own plans and beneficiary designations.

For example, in 1996, a man named Warren Hillman named his wife as beneficiary on his federal employee’s life insurance policy. They later divorced, and Mr. Hillman remarried four years later, but he never updated his beneficiary designation. When he died, his widow sought to claim the payout, but she was denied because she wasn’t the beneficiary. The dispute over that policy made it all the way to the U.S. Supreme Court. In 2013 the court ultimately granted the death benefits to the ex-wife because she was the listed beneficiary. (Read about more court cases involving problems with beneficiary designations on life insurance policies here.)

It’s pretty easy to picture an ex-wife enjoying money that a widow thought was rightfully hers; the same way I picture the fans in L.A. enjoying the sun and the Rams. Every day, we help clients coordinate their beneficiary designations with their estate plan to make sure everything ends up in the place you desire. After you’re gone, the best way to make sure your family knows your wishes is to leave them in writing. 

Be Sure to Update Your Beneficiary Designations in Writing

Your things (and your family) are far more important than a football team. Therefore, it is vitally important that you make sure your beneficiary designations are up to date and your estate plan is current.

Life is constantly changing, and when it does, your plan needs to be updated to reflect those changes. At Edwards Group, we have a special program that helps make sure your plan stays up to date. Read more about our Dynasty Program here.

If it’s been a while since you’ve updated your plan, give us a call at 217-726-9200 or plan to attend one of our upcoming workshops.

 

 

lottery ticket

How NOT Winning the Lottery Makes Your Life Easier

Big changes in your life may require updates in your estate plan. What kind of big changes? And what should you do about it?

by Attorney Chris Flynn

I didn’t win the Powerball, either…

And that’s okay. Can you imagine how much life changes after something like that? The good news is, since I didn’t win the largest jackpot in US history, the things I’m doing now, and the planning I’ve done for later, don’t have to change at all. I’ve worked with several clients recently though, who have gone through big changes in their life, some of whom have received an inheritance (typically less than the recent $1.5 billion jackpot), bought a new house, had a loved one get married, or become disabled.

Any of these types of changes in your life could mean that you need to update your estate plan.

We frequently help clients update their plan after big life changes. By updating your plan periodically, you ensure that:

• any new money or wealth will go where it needs to go instead of being eaten up by things like nursing home costs or taxes.

• any planning you did based on your prior home is also done for your new (or second) home.

• your child’s inheritance can be protected in a trust where things like future divorces, long-term care costs or creditors cannot “steal” it away.

While we often help clients who already have done planning elsewhere to update their plans, our Dynasty program has proven to be a simple and cost-effective way to make sure our clients’ plans are always up-to-date. Through this program, we follow up with our clients regularly to confirm that their plan is up to date with the law, but also that their plans capture any changes that have occurred in life, health or assets.

Even more important than updating your current plan, is making sure you have a plan in the first place. Our workshop, Aging With Confidence: 9 Keys to Wise Planning & Peace of Mind, is a low-risk way to get started. Give us a call at 217-726-9200 and RSVP for an upcoming workshop today. Attending a workshop makes the planning process easier and more effective.

The greatest threat to an effective estate plan is not taking any action at all, so take a step today and call us t 217-726-9200.

5 Problems Caused by VA Financial Planners

There are financial planners out there who hold themselves as VA planners offering “free” VA benefit advice, but their “free” advice often comes with a hidden price.

Non-attorney Planning Tactics Can Backfire

David was in Atlanta a few months ago at the Academy of VA Pension Planners. It’s one of many professional organizations that David belongs to in order to make sure the firm serves our clients better than anyone else. The AVAPP solely focuses on helping Veterans, and their families, get the benefits they earned in service to their country.

Did you know that only 28% of Veterans who qualify use their benefits? And as one of the only law firms in Central Illinois to be accredited by the VA, we want to make sure that everyone who has served our country gets to age with dignity and receive the best care possible.

There are some financial planners who hold themselves out as VA planners offering “free” VA benefit advice. Some are very knowledgeable, but there are some problems with the “free” advice that you need to watch out for.

5 Tactics that Non-attorney VA Planners Use

1. Transferring the house to the kids

Maximizing VA benefits sometimes means rearranging assets. One mistake we have seen is transferring a house to the children. While this will help work for VA benefits (allowing the house to be sold without messing up benefits), there are problems with this strategy. One problem is when the house is later sold, the kids will pay capital gains taxes that could have been avoided. By putting the house in a Veterans Asset Protection Trust, we could get the VA benefits but also avoid the capital gains tax later.

2. IRAs and taxes

Because the VA has asset limits, sometimes IRA accounts must be moved to qualify for benefits. Without proper tax planning, some families incur a huge tax bill that could have been avoided. Instead, working with an experienced attorney can help you consider all the planning options and the tax impact.

3. Annuities with long surrender charges

Often, the “free” VA advice comes with a recommendation to tie up assets in an annuity with long surrender periods. Is anything really “free” in this world? Unfortunately, some families do not realize that the VA financial planner they are relying on is ultimately trying to sell them costly and expensive annuities that tie up their assets far into the future. (This is how the financial planner makes his living.) Instead, a Veterans Asset Protection Trust can help you protect and arrange assets, while allowing your family free access to the investments held in the trust. You need to consider all of the legal and financial tools to see which is best. Unfortunately, non-attorneys often ignore legal tools, such as trusts, even though they may be the best option to help qualify for benefits.

4. Transferring assets to children

Some non-attorney planners transfer assets to the kids so the client can get VA benefits. So, what is the problem with that? If the client needs more care down the road, the funds may have already been spent by the kids. Plus, the gift could keep them from qualifying for Medicaid. (And 70% of nursing home residents use Medicaid to pay for their care.) Transfers of assets must consider both the current goal (VA benefits) and future needs (such as Medicaid benefits to pay for nursing care). By working with an attorney experienced in both VA and Medicaid planning, you can have a flexible plan that considers future health needs.

5. Messing up wishes

Another strategy that non-attorney planners use that can backfire is to transfer the parent’s money to one child in order to qualify for VA benefits. However, that strategy then changes the entire estate plan because one child legally ends up with all the money (unless they voluntarily share it with their siblings, and sadly, we’re experienced enough to know this happens much less often than you think). Instead, once again, the Veterans Asset Protection Trust is a great tool to preserve your wishes after death, but still help you qualify for VA benefits now.

Call 217-726-9200 if you have any questions at all. We will be more than happy to talk with you.

Lesson #2 from Robin Williams – Your “Special Stuff” List

Another way (see the first way here) in which you can minimize fighting amongst your family after you’re gone is by creating a “special stuff” list before you go.

Creating a “Special Stuff” List Can Minimize Fighting Amongst Your Family After You’re Gone

Last week, we talked about having “The Conversation” with your kids and how it can really increase the chances that things will go as planned after you’re gone. This week we are really excited to offer you a special resource that will help you decide who should get what special possessions and heirlooms! (Keep reading for the FREE resource.)

Many families fight over the personal property “stuff” as much as they fight over money. (Sometimes even more than they fight over money.) When it comes to preventing a big fight after you die, it’s not enough to deal with the financial items. You must deal with property that has emotional or family value.

Because of this, I encourage clients to create a “special stuff list” that directs certain items to the people they want those items to go to. This list, which is officially called a Memorandum for Distribution of Personal Property, is then incorporated into the Will or Living Trust.

7 Things to Consider When Making Your “Special Stuff” List

1. What did your parents or grandparents pass down to you that you want to pass on?

2. What items bring back the most memories of your family time?

3. Have you discussed with family what they might want? Some families have a “lottery” style selection process where they openly discuss item by item what they may want. Others prepare a “fire inventory” list of their belongings and then send copies to their children, requesting that the children mark the items they want on a scale from 1-10 with 10 being they want that item the most. Once the children return their lists to the parents, the parents can then more adequately assess who will get what.

4. How will you preserve the stories behind the items? Write out the story, record a video or audio clip about it. Even a few short sentences will mean a lot when you’re gone.

5. Don’t rely on Post-it notes, masking tape or just assume, “The kids know who gets what.” This just doesn’t work!

6. Make sure your “special stuff” list or letter is signed and dated, with copies sent to your attorney. Also keep copies with your Will or Living Trust paperwork.

7. In order to better identify items, take photos and include them with your “special stuff” list.

A Few More Things to Consider…

While creating your list, don’t assume the things you find valuable will be the same things your family finds valuable. It’s always better to communicate about what you want to leave, and to whom, beforehand. Maybe you want your granddaughter to have your birthstone earrings, but maybe she’d rather have the old battered, blue pottery bowl that you used to  make pudding in together. You might never know the bowl was meaningful to her without a conversation, and you might even throw it out without any consideration, thinking, “Nobody’ll want this ol’ thing.”

DOWNLOAD Your FREE “Special Stuff” List Worksheet

It’s very difficult to see families torn apart by issues like “who gets Grandma’s yellow pie plate?” Our firm is always seeking ways to make planning easier for you, and we are really excited about our latest resource: Your “Special Stuff” List Worksheet. Set aside an afternoon to spend going through the worksheet line by line, and you should be well on your way to making sure your family will still be speaking to each other after you’re gone.

As always, if you have any questions, please feel free to call us at 217-726-9200. We will be more than happy to help you in any way possible.

robin williams; death; wills; trusts

A Lesson from Robin Williams: Having “The Conversation”

One way in which you can minimize fighting amongst your family after you’re gone is by having “The Conversation” before you go…

Does Your Family Have Trust Issues Like Robin Williams?

After his death in 2014, it appeared that Robin Williams did everything right when it came to estate planning. The bulk of his wealth was transferred through well-thought-out (and private) trusts that distributed his belongings to his three children while also providing for his current wife, so she could stay in the house they shared. And yet, his third wife and his three children still got involved in a court case with each other. So what happened? And what can we learn from this situation?

Effective Estate Planning Anticipates Emotions Will Run High

The first thing people should know is that all bets are off when someone dies. In the extremely emotional  environment of grief and loss, even the best families experience some stress and disagreement. It’s just hard to avoid. Every estate planning attorney could fill a book with unbelievable real life stories about this very thing.

Effective estate planning attorneys work hard to mitigate this risk and prevent these issues from tearing families apart. And that’s where “The Conversation” and the “Special Stuff List” come in. Over the next two weeks, we’ll look at two important actions you can take to minimize fighting in your family.

“The Conversation”

Just like the birds and the bees talk you once had with your kids when they were younger, this next conversation can bring up almost as much anxiety. Many times it’s “easier” to start a conversation about inheritance and estate planning during family gatherings or holiday get-togethers. I know. I know. That sounds like a real downer of a conversation for a family event, but let me assure you, it will be a lot less unpleasant than what your family will experience after you’re gone if you DON’T have “The Conversation” with them.

Here are 5 tips for talking about inheritance:

1. Share your own reasons or motives for bringing up the issue. Then try to clearly convey what values are really important to you. What’s important to accomplish with your assets after your death? What does fair mean to you? What does it look like? What items do you think have special meaning? What stories about those items need to be written down and shared with your family?

2. Ask “what if” questions to find out how your family feels about certain scenarios. “What if Mom had to go in a nursing home and I was already gone? Would you want to keep the house? What would you do with the stuff in the house?” Or “what if Mom and I downsized. What would you want us to keep?”

3. Clearly convey choices you’ve already made, like who is in charge of making decisions after you’re gone (or incapacitated). For example, if your will says that the children should share your estate 50/50, then one child may understand that to mean keeping the house and sharing it. The other child may see it as an opportunity to sell the house and get some money. Bam. Now you have a big fight and your children never speak to each other again. (This is a TRUE story.) It is vitally important to talk to your kids about how you want things done before you’re gone (and then make sure to tie it down legally, as well.)

4. Look for natural opportunities to talk about the issue. Sometimes the death of a neighbor or a friend can provide better timing for this conversation. Celebrity deaths like Robin Williams can also present good times to bring up the topic, especially if their estate is presenting problems you would like to avoid.

5. Listen. Remember that listening is an important part of communication and any conversation. Take time to listen to your family’s perspective and opinion throughout the course of “The Conversation.”

Having “The Conversation,” along with detailed and effective legal planning will go a long way in avoiding the problems that Robin Williams’ family is now having. Read more tips on having “The Conversation” here.

In a future blog post we’ll talk about creating your “Special Stuff List.” This special list further clarifies your wishes and intentions with regards to certain special pieces of property. (Like your paperweight collection or the antique shotguns you inherited from your grandfather.)

As always, if you have any questions, please feel free to call us at 217-726-9200. We will be more than happy to help you in any way possible.

[Photo by Jacobo Hoyos Zea via Flickr, licensed under Creative Commons.]

7 Types of “Helpers” You Need to Watch Out For

As you age, or as you complete your estate plan, you’ll need to name different kinds of “helpers” who will carry out your plan when the time comes. These helpers are officially known by different names depending on the job they’re given. They can be known as trustee, executor, power of attorney or guardian, but no matter what their legal name is, their job is to act for you when you can’t act for yourself. This can happen in cases of stroke or other debilitating illnesses as you age, or after a death. It’s very important you choose the right person.

Our founding attorney, David Edwards, has been in the estate planning field for almost two decades now. When you’re that experienced, you start to notice trends. Here are some kinds of helpers David has seen over the years – helpers you may want to avoid if you have any of these “types” in your family:

1. The Do-Nothing – Mom died 2 years ago, but her house is still sitting empty, crumbling. Tax bills and utilities eat up the estate, while the rest of the family waits. He says, “I’ll get to it soon.”

2. The Messy One – In grade school, this person couldn’t find her homework. As a teenager? Clothes piled a foot deep in her bedroom. As an adult? She’s often late to appointments (if she remembers them at all). And finances? Her checkbook has never been balanced, and she gets monthly overdraft notices. Now she’s been named a trustee…

3. The Fighter – His competitive spirit was great while playing sports in high school. But it has not worked out so well with his family or his marriage. Being right is more important than anything else. And now, as a trustee, he gets to decide what’s “right.” There’s no talking to him about it, because it’s his job, and it’s “none of your business how I do it.”

4. The Romantic – “I’m just not ready to sell grandpa’s car or fishing cabin yet.” This trustee lets her emotions get in the way of the job – which is to sell or distribute trust assets. And it’s not just the car and cabin – what about personal property? How do you sort out or (gasp!) even throw stuff away? “It’s just too hard. I can’t do it yet.”

5. The Bossy One – The parents named Junior and Sissy as co-trustees, wanting both of them to have a say and to work together. But big brother is used to being in charge and taking over. He won’t even talk to his sister about what is going on. “If you don’t like it, go get a lawyer… I don’t care if we spend the entire estate on legal fees!” Bossy brother pushes and threatens, leading the more reasonable sister to let him have his way. “It’s just not worth it to try to fight.”

6. The Stress Ball – She’s always running here and there, never any time to sit and talk about the estate. IF you get her on the phone she says, “Sorry. Can’t talk now. Can I call you back?” She means to do her job as trustee, but she can’t find time for the things in her own life, much less this added duty. The family isn’t sure what to do – take legal action or just wait a little longer.

7. The Broke One – His ends never seem to meet, and he’s always in financial crisis. Bill collectors call all the time. Now he’s named as a trustee and gets a checkbook showing a nice balance. It’s easy to rationalize – “I’ll just take some of my inheritance early, to get past this crisis.” But then he needs a little more and a little more. As time passes, the family wonders what has happened to their parents’ money.

So, what types of people make good helpers? Here are some things to consider in naming “helpers.”

We understand that this can be a very daunting task. As always, we are here to help you create an effective estate plan. You don’t have to do it alone. We’ll guide you along every step of the way. Give us a call at 217-726-9200 to get started, or attend a FREE workshop.

Call 217-726-9200 to RSVP for an upcoming workshop today or to schedule an Initial Meeting.

Estate Planning is Like… Birthday Cake

Much like your favorite birthday cake flavor, everyone likes different things when it comes to estate planning.

Well, as of March 5, I’m another year older! And to celebrate I got to have the best birthday cake in the world — spice cake with chocolate icing! What kind of cake do you request on your birthday?

Dave Bday cake 2015

In our family, everyone seems to have their own favorite. For my wife Michelle, it’s spice cake with white icing. (And she is forever trying to talk me into changing the icing on my birthday cake!) 8-year-old Bailey asks for white cake with white icing, and I’m not sure 4-year-old Cole has settled on a choice yet. My dad likes yellow cake with chocolate icing. My mom? Carrot cake with cream cheese icing. My brother, Jay, for decades requested turtle cake. (Which Michelle and I found out firsthand, does not turn out well if the recipe is copied down wrong!) Jay’s wife, Beth, likes white cake with white frosting just like Bailey.

Everyone’s got an opinion. Of course, the rest of them are all wrong! Spice cake with chocolate icing is clearly the best choice for a birthday cake.

And we haven’t even gotten to the ice cream! Some want chocolate. Some want vanilla. Others like cookie dough or cookies ‘n’ cream. We’ll save that for another blog post!

Everyone likes different things. The same choice does not work for everyone, even if they’re from the same family.

With your estate plan, you need a plan that fits your family – not a fill-in-the-blank form that doesn’t reflect your unique values, wishes, or family challenges.

And within your plan each child or loved one may have a different challenge or need that should be addressed. Don’t treat them all the same. Some want white icing. Others need chocolate. A good plan will take into account their personality, financial wisdom, and the unique situation of each heir.

If you need a more personalized (and therefore, more effective plan), our free workshop, Intro to Edwards Group: Wills and Trusts Orientation is a great way to get started. Call us at 217-726-9200 to RSVP for the next workshop. Find out our upcoming workshop dates here. Learn more about the workshop and what you’ll learn by attending, here.

6 IRA Planning Tips

Here are 6 IRA planning tips you should consider for your family:

1. Help your grandkids with their own IRA

Anyone who starts an IRA early, in their teens or 20’s, will see it grow to huge amounts by retirement. But young people often don’t have the funds to put into an IRA in the early years. The solution? If you have the means, help your grandchildren put money into an IRA as soon as they start working their first part-time job, or as soon as you can. What do I mean? If you have the means, give each grandchild with a job (they have to have income to do an IRA) $5500 with the stipulation that they put it into a Roth IRA. Even if you only do this for a few years, it will make a HUGE difference in their retirement later.

2. Use your IRA for charitable giving

Do you plan to leave money to a charity or church at your death? If so, use IRA funds to do it. If you leave the IRA to charity, there will be no tax on the IRA because the charity is tax exempt. Uncle Sam will be out of luck. How do you do this? Name a charity on your IRA beneficiary designation or consider using a donor advised fund at the Community Foundation for the Land of Lincoln (to direct funds to the charities you choose).

3. Explode your wealth with those unwanted RMD’s

Once you are age 70, you have to take out a minimum amount (RMD) from your traditional IRA each year. What do you plan to do with that money? Do you need it? If not, what about using it to create more wealth for your family? One option is to buy a life insurance policy using your RMD every year to pay the premium. The benefits? More money at death, plus the life insurance death benefit is income tax free! (Unlike the IRA that has a built-in tax bill for your family.)

4. Again, consider your grandchildren (and children)

Why not leave some (or all) of your IRA to your grandchildren? Worried about skipping your children? What about getting life insurance to make up the difference? The result? Save income taxes, bless the grandkids, and leave your kids tax-free life insurance funds (instead of an IRA with a tax bill).

5. Consider a trust for your IRA

Want to avoid your kids or grandkids IRA “blowout” (taking IRA quickly and incurring a lot of tax)? Leave the IRA instead to a trust, so the trustee will make sure the “stretch out” happens. Read more about “blowouts” and “stretch outs” in last week’s blog post.

6. Convert to a Roth IRA

If your family will stretch the IRA, the biggest bang is to use the Roth IRA. Convert the IRA now to a Roth, avoid the RMD’s during your life, then give your family tax free distributions for years or decades. Poor Uncle Sam will be left out! (But remember to consult your tax advisor regarding the timing and amount of those Roth conversions.)

IRA

7 IRA Planning Traps to Consider

When it comes to your IRA, there are some planning traps you need to look out for…

Here are 7 IRA planning problems to consider:

1. Incorrect beneficiaries – This is very basic, but often overlooked. Confirm that the beneficiaries are set up correctly. If you lack a beneficiary, then the account will go to your estate, limiting your “stretch” to as little as 5 years. Have you named the wrong beneficiaries or are you missing someone (like a new grandchild)? If you have named a trust as the beneficiary, was that done as part of a detailed plan with an attorney experienced in IRA trust planning?

2. A “blow out” instead of a “stretch out” – Remember, a big goal of IRA planning is to pay the taxes later by doing a “stretch” IRA. This means that we want your child to be able to take out the IRA over their life expectancy. But many kids don’t do it. In fact, the vast majority of kids take out the entire IRA within a couple years of death. Why do kids take it out (and pay the taxes now)? Here are a few reasons:

  • They want to spend it!
  • They don’t know the benefit of the stretch.
  • They wrongly think they can roll it into their own IRA (so they take it all out, triggering tax, then it’s too late to put back in).
  • They cash out a Roth IRA because it’s tax free, not realizing they are missing out on years of tax free growth in the future.

3. Not getting good advice – Many families have cashed out retirement funds or annuities and are later surprised by a big tax bill. Good advice from your attorney and tax advisor after death will help the family understand the options.

4. Not considering younger generations – Do you like your grandkids? Well, what about saving tax while helping out your grandchildren? The younger the beneficiary of your IRA, the longer the stretch and the bigger the tax savings. You might consider giving your IRA’s (or part of them) to your grandchildren.

5. Naming grandchildren as direct beneficiaries – What if someone took our advice about younger generations and decided to name grandchildren as IRA beneficiaries? That’s good, right? Well, yes, but there could also be problems. If you name a minor child as beneficiary, the IRA company may require a court guardianship before the grandchild can benefit from the IRA. Then, at age 18, the grandchild gets control of the IRA, regardless of the remaining amount. (And we all know what happens when 18-year-olds inherit large sums of money.)

6. Not considering a trust to hold IRA funds after death – Many people incorrectly think that leaving an IRA to a trust will trigger tax on the entire IRA. But this is not true. IRA funds and trusts require special expertise and planning, but a properly drafted trust can hold an IRA and still benefit from the stretch out. And using a trust can help avoid the “blow out” mentioned in #2, while protecting the money from young heirs, future divorces or other unforeseen risks.

7. Not converting to a Roth IRA – Converting to a Roth IRA means you pay taxes now and then future growth of the IRA is tax free. If you don’t need the money, and you can afford to pay the taxes, converting to a Roth may give your family more money later. Let’s ay you convert to a Roth at age 70. A Roth IRA has no RMD (required minimum distributions) so if you live to be age 95, you will have had 25 years of tax free growth that you can leave to the family. And the kids (or grankids) can have another 30-50+ years of tax-free growth if they “stretch” the Roth IRA. Converting to a Roth IRA is a great tool, but please consult your tax advisor first. Make you know how much tax will be owed before you move funds to the Roth IRA.

Are you ready to find out what you should do when it comes to your IRA? And not just what to avoid? Read our article, 7 Questions to Ask in Order to Do Effective IRA Planning.

IRA

7 Questions to Ask In Order to Do Effective IRA Planning

IRA planning can be tricky. In order to make sure you plan as best as you can, you should discuss the following questions with your attorney and other advisors:

1. Will you need the IRA funds during your life? If not, you may want to convert to a Roth or use the RMD’s to purchase life insurance to grow the wealth going to your family.

2. Will your heirs need it shortly after your death? If so, then the stretch out is not relevant.

3. Are you doing any charitable giving? If so, use the IRA to do it, if possible. That way the contribution is tax free.

4. Do you want to protect what you are leaving to family from their future divorces, lawsuits, creditors, poor judgment, wild spending, etc.? If so, you need protective trusts for each of your heirs. An IRA can go to a properly set up trust and still get the “stretch out”.

5. Are you facing estate tax at your death? If so, you need careful planning to avoid a double tax. An IRA subject to both estate tax and income tax can sometimes lose 75% or more to taxes!

6. Are you in a 2nd marriage? His kids and her kids? If so, be careful leaving your IRA to your spouse. You want to balance out your wishes for your kids with your desire to provide for your spouse. You can’t assume you can leave the IRA to your spouse who will later leave it to your kids. First, it may be spent and gone. Second, your spouse has every legal right to change the beneficiary after your death (to his/her own children).

7. Is your IRA (or other tax deferred retirement plan) a large percentage of your total estate? If so, then even more is at risk. You need careful planning, and it’s vitally important you consult with a professional.

Effective IRA planning is very important in effective estate planning. Give us a call today at 217-726-9200 if you have any questions, or check out one of our upcoming workshops to find out more about effective planning.