Door County WI Estate Planning Blog

Friday, January 29, 2010

6 Biggest IRA Beneficiary Form Mistakes

Do you want your heirs to have to chase after their IRA Money? Better make sure you have an up to date beneficiary form. The Supreme Court of the United States decided last year in the case of Kennedy vs DuPont, the ex-wife who was still listed on the beneficiary form gets the money, even though the divorce court ordered  her rights terminated and she signed a waiver.

So what are the Biggest mistakes:

1. You cannot find the form. The Supreme Court made it clear, the beneficiary form rules. Without the form you are stuck with the default provisions of the plan.

2. The form is out of date. Have there been any changes in your life, such as marriage, divorce, a death. Your will cannot change the beneficiary of your plan!

3. You have not named a backup beneficiary. If you do not name a back up beneficiary then  who knows who gets the money.

4. Naming a minor as a beneficiary. This will result in a trip to the Probate Court and later when the child turns 18 to the Sports Car Dealership. The only question will be what color.

5. Missing out on the Stretch IRA Opportunity. This can turn a modest IRA into Millions for your beneficiary.

6. Not providing Creditor Protection for the Beneficiary. The Retirement Benefits Trust is just the solution.

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Tuesday, January 19, 2010

MAJOR ALERT

"No citizen may soundly sleep while Congress is in session" Mark Twain

The unthinkable has happened. A distracted Congress through its inaction has made it difficult for anyone to obtain a sound and restful sleep in 2010. A few opportunities tossed in with some major problems.

OPPORTUNITIES

1. FEDERAL ESTATE TAX HAS BEEN REPEALED, This has set off all kinds of jokes about pushing Grandma off the train, but hold off because this change is only for 2010.

2. GENERATION SKIPPING TRANSFER TAX REPEALED, but again only for 2010. Create Dynasty trusts for the Grandkids.

3. FEDERAL GIFT TAX HAS BEEN REDUCED TO 35% FROM 45%. Make taxable gifts while the rate is lower. But again this change is for 2010 only.

4. EVERYONE CAN CONVERT A TRADITIONAL IRA TO A ROTH IRA. This change is permanent, or as permanent as any law can be. The $100,000 income limit has been removed. If you are over 701/2 make sure you take your RMD before doing the conversion. Also Wisconsin has not yet approved this but legislation is pending.

PROBLEMS

1. BRAND NEW CARRYOVER BASIS HAS REPLACED THE ESTATE TAX.. This creates a record keeping nightmare. Have you kept records of the cost of everything you acquired over the years? This new tax could be higher than the Estate tax.

2. FEDERAL ESTATE TAX HAS BEEN REPEALED. Almost all estate plan documents use formulas based upon the federal estate tax. The estate tax is no longer in existence so plans need to be reviewed to see how this will  affect your planning.

To create more confusion no one knows what Congress will do now. Some in Congress want to restore Estate tax retroactive to January 1, 2010,(there is a question if this is constitutional), others want to do nothing, and still others want to change the law but prospective only.

At this point there is "massive , massive confusion" according to Senate Finance Chair Max Baucus.

Stay tuned. It is going to be an interesting year.

 

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