Journey Financial Blog
Posts Tagged ‘Estate Planning’
Wednesday, August 18th, 2010
The Value of Advice: Report July 2010
Investment Funds Institute of Canada
Here’s a brief summary of the main findings:
“In this Report we have looked at the financial and investment advice business…and identified some of the principal values that investors derive from the relationships they have with their advisors….
- Most Canadians find that they lack the financial knowledge, or the time required, to research all the options available to them
- Advisors help their clients make the important financial decisions they need to make at critical points in their lifetimes (see chart below)
- Advisors assist in the setting of planning targets; the choice of the right vehicles to reach those targets; and the development of asset allocations matched to client needs
- Having advice is strongly associated with the accumulation of financial wealth regardless of income level or age of household
- Advised households save more, regardless of income and age, than their non-advised peers
- Advisors help choose the right asset mix for an individual client’s circumstances, objectives, and risk tolerance
- Advisors help their clients to adopt good savings and investment behaviors early in life and to maintain those practices through their lifetimes
- Advised investors are more confident about their future than non-advised households
- Investors who work with an advisor are 33% more likely to feel empowered and educated than those who invest without advice
- Investors using advisors are much less likely to be the targets of fraud than those who do not use advice
- When times get tough, individuals trust their advisors for financial advice - even on financial questions outside of their immediate business relationship
- Advisors provide highly durable values, such as the values learned about adopting early in life a savings and investment culture, avoiding common behavioral investment errors, and understanding the benefits of a financial plan. “
Tags: Estate Planning, Investment Advice, Investment Style, linkedin, NEW, Taxes
Posted in 401k plans, Avoiding Risk, Estate Planning, Financial Habits, Financial Planning, Investment Advice, Investments, Lifestyle, Parents, Retirement, Taxes | No Comments »
Monday, July 26th, 2010
Not likely…plus you can hedge your bets by doing partial conversions.
WSJ June 19, 2010
Is A Roth IRA Safe From Taxes?
“Congress wouldn’t tax Roth IRAs, would it?
It is a burning question for thousands of taxpayers now deciding whether to pay taxes to convert their regular individual retirement accounts to Roth accounts. All taxpayers are eligible to make the switch, because this year the income limit of $100,000 was permanently repealed. Many have done so already: Fidelity Investments says that as of May 31, the firm had handled 87,000 Roth conversions this year, about four times the number for the same period last year.
The bottom line: Roth benefits can be real, while cutbacks mightn’t come for years if at all; meanwhile, tax rates are rising for those at the top. Wary taxpayers who stand to benefit from a conversion but don’t want to be vulnerable to changes might want to do a series of partial conversions instead of one large one. These are allowed, and advisers often recommend them as a way of avoiding bracket leap on a conversion.”
Tags: Estate Planning, Investment Advice, linkedin, NEW, Taxes
Posted in Avoiding Risk, Estate Planning, Financial Planning, Investment Advice, Investments, Lifestyle, Roth Conversions, Roth IRA, Taxes, Uncategorized | No Comments »
Sunday, June 20th, 2010
Go to your custodian and look on line in the account information section of their website. Make sure your benenficiary forms are reflecting what your estate planning documents say. If you need help with this, contact your attorney or your financial planner. The brokerage firm won’t know how to confirm the way it should be, they will only be able to tell you the way they are.
March 1, 2010
Check those beneficiary forms
Not doing so in a newly converted Roth IRA could be a costly mistake for clients
“…The beneficiary form is the single most important estate-planning document of individual retirement accounts and Roth IRAs, determining the ultimate value of the accounts, who ends up with the money and for how long.
Every custodian has its own procedures for IRA conversions. Most times, a new account is established, and the completion of an updated beneficiary form is requested. In fact, it is more important to complete the beneficiary form for a Roth IRA than for a traditional IRA (though omitting the form in either case is never a good idea). …”
Tags: Estate Planning, Investment Advice, linkedin, NEW, Taxes
Posted in Avoiding Risk, Estate Planning, Fiduciary, Financial Habits, Financial Planning, Investments, Roth Conversions, Roth IRA, Taxes | No Comments »
Sunday, June 20th, 2010
For those who like to minimize their risks this will be of interest to you. Thoroughly think through your moves by considering a range of possible outcomes.
March 1, 2010
Convert existing IRAs into multiple Roths
Strategy could be a tax saver if investor wants to switch back to traditional IRA in the future
Tags: Estate Planning, Investment Advice, Investment Style, linkedin, NEW, Taxes
Posted in Avoiding Risk, Cash, Financial Planning, Investment Advice, Investments, Roth Conversions, Roth IRA, Taxes | No Comments »
Sunday, June 20th, 2010
For those who are fortunate to have such planning challenges… no sleeping at the wheel!
Investment News
April 5, 2010
Wealthy might have to kiss their GRATs goodbye
Legislation would make the tax-saving trusts much less favorable
“…GRATs are a trust with a specific life or term that allows a wealthy person to transfer more money to heirs than they otherwise could under the “$1 million in a lifetime” rule.
With the strategy, an asset is placed into a trust by a grantor, who then takes back an annuity, which is made up of the asset value plus a variable interest rate.
GRATs work best when the asset appreciates more than the interest rate, a hurdle which has been easy to leap recently because rates have been so low. This month, for example, the rate is 3.2%, and any appreciation beyond that goes to a grantor’s heirs when the term of the GRAT ends, as a tax-free gift.
Shorter-term GRATs — typically two or three years — have been most appealing because the asset may appreciate quickly, and the investor is not likely to die over the life of the trust, an event that would force the entire asset back into the taxable estate….”
Tags: Estate Planning, Investment Advice, Investment Style, linkedin, NEW, Taxes
Posted in Avoiding Risk, Business Owner, Estate Planning, Fiduciary, Financial Planning, Inflation, Investment Advice, Investments, Lifestyle, Parents, Taxes | 1 Comment »
Sunday, June 20th, 2010
Tripping up will be very costly, so convert carefully and make sure you are doing it right.
What Can’t be Converted to a Roth
Investment News
April 5, 2010
The tax code allows only eligible rollover distributions to be converted to Roth individual retirement accounts. That means that besides required minimum distributions, there are a number of other items that can’t be converted. These include 72(t) payments, hardship distributions, corrective distributions of excess deferrals, deemed distributions (i.e., defaulted plan loans, though plan loan offsets are eligible for rollover) and dividends from employer securities. In addition, funds in an inherited IRA are not eligible to be converted to a Roth IRA.
How about cash? You can’t simply take $100,000 from the bank or from the sale of an asset and convert it to a Roth IRA; that $100,000 is not an eligible rollover distribution. You may be able to contribute up to $5,000 per year ($6,000 if 50 or older) to a Roth IRA, but you must have earned income, and there are income limitations (even though no such limitations apply to making contributions to a traditional IRA). Although the Roth IRA conversion limits have been repealed, the Roth contribution limits are still in effect.
Tags: Estate Planning, Investment Advice, Investment Style, linkedin, NEW, Taxes
Posted in Avoiding Risk, Cash, Estate Planning, Fiduciary, Financial Planning, Investment Advice, Investments, Retirement, Roth Conversions, Taxes | No Comments »
Monday, May 10th, 2010
Planning Opportunity #2: Roth Conversion Analysis
Opportunity cost: $649,000 in extra networth at age 90
Separate your analysis from actually making the decision. Looking at the numbers doesn’t commit you. And you don’t have to go “all in”. You can hedge by doing a partial conversion and get a “do-over” if account values fall via the re-characterization provision. Tax diversification may be just as important as asset diversification for your retirement income. Read converting before 2013 may reduce impact of 3.8% surtax in the health bill.
A simplified illustration – The Smiths are 50 years old. Sue has a $150,000 IRA, 100% pre-tax contributions. If the amount converted is taxed at the maximum AMT rate of 28% on the conversion, taxes due will be $42,000. If they invested the taxes due amount in their states municipal bond fund earning 5% over 41 years it would be worth $311,000. If they convert the IRA to a Roth this year, the Roth, assuming 7% average annualized return (until they were 90 years old), would be worth $2.4 million, versus without the conversion, $1.44 million in the IRA. The difference is $2.4m – (1.44m + 311k) = $649k. The benefits only grow for the beneficiaries. If you are worried that the government will renege on the “tax freeness” I am betting that the government may nibble around the edges, but $649,000 provides a decent edge for them to nibble on without spoiling the benefits of converting.
Tags: Estate Planning, Investment Advice, linkedin, NEW
Posted in Financial Planning, Investment Advice, Parents, Retirement, Roth Conversions, Roth IRA, Taxes | No Comments »
Monday, May 10th, 2010
Planning Opportunity #1: Self-funding long term care
Opportunity cost: Paying for life insurance benefits when you may need funds for long term care more.
My clients know that I am not a big fan of long term care insurance, especially for people who have the means to self fund. However, a recent study by the Center for Retirement Research at Boston College noted “The cost of long term care represents a substantial financial risk for all but the poorest households.”
Because changes introduced in the Pension Protection Act of 2006 are now effective in 2010, it is now possible to exchange life insurance and deferred annuities for long term care insurance coverage. This is huge. What this means is you can save a fortune on taxes by funding your long term care needs with tax qualified gains. You can also convert existing permanent insurance and annuities via a 1035 (tax free) exchange to products with Long Term Care Riders.
A number of insurance carriers have new offerings that are targeted to individuals who have the funds to self fund. The way they work is that you allocate money into an insurance product with a single premium. If you don’t use it for long term care, you have a death benefit for your heirs. If you do need it for long term care, you have a larger pool of money for long term care. If you want the money back, there is a 100% return of premium guarantee.
At least 70% of people over the age of 65 in 2020 will require long-term care at some point in their lives. The average cost of nursing home care in Massachusetts today is over $100,000 per year.
Tags: Estate Planning, Investment Advice, linkedin, NEW
Posted in Avoiding Risk, Business Owner, Estate Planning, Fiduciary, Financial Planning, Fixed Income, Healthcare, Inflation, Investment Advice, Lifestyle, Parents, Retirement, Taxes, annuities | 1 Comment »
Thursday, May 6th, 2010
Here is the most concise article I have seen that explains what is going on. The short answer, no one knows. That being said, if you do not have will, living trust, health care proxy, durable power of attorney and you are married and or have children, RUN, don’t walk to see an attorney. No excuses.
Vanguard April 26, 2010
Death may still be certain, but estate tax is up in the air
“…”This is a unique situation,” said Michael Corr, a senior wealth planner with Vanguard Asset Management Services™. “With so much uncertainty around the estate tax, I’m recommending that our clients consult with their attorneys or tax advisors. Their wills may need to be updated to include language addressing different tax scenarios.”
The uncertainty stems from a 2001 law that gradually reduced the estate tax rate to 45% from 55% and gradually increased the amount exempt from federal estate tax to $3.5 million from $1 million. The law also abolished the estate tax for 2010, only to reinstate it in 2011 at 55%—and restore the original $1 million exemption limit. Congress could restore the estate tax this year, including a fix retroactive to January 1. Or the tax could return in some other form next year. No one really knows. …”
Wealth transfer taxes in transition
| Year |
Estate, gift, and generation-skipping transfer tax rate |
Estate and generation-skipping transfer tax exemption |
Gift tax exemption |
| 2009 |
45% |
$3.5 million for each. |
$1 million |
| 2010 |
No estate tax or GSTT. Maximum gift tax rate is 35%. |
Not applicable. |
$1 million |
| 2011 |
55% |
$1 million for each.* |
$1 million |
* The GSTT exemption is subject to cost-of-living adjustments.
Source: Vanguard.
Tags: Estate Planning, Investment Advice, linkedin, NEW
Posted in Avoiding Risk, Business Owner, Estate Planning, Exit Planning, Fiduciary, Lifestyle, Parents, Taxes | No Comments »
