Monday, April 28, 2014

The NUA Advantage

Many corporations offer their employees different kinds of incentives and/or bonuses. One of these is company stock held in a 401(k) or other qualified pension plan. If you hold stock from a previous employer in a qualified plan, you are eligible, under the IRS code, for special tax treatment on those assets based upon a concept called Net Unrealized Appreciation (NUA).

Monday, April 21, 2014

Estate and Inheritance Tax Facts

Estate Taxes and inheritance taxes are two entirely different assessments. Estate taxes are calculated based on the value of a deceased’s taxable estate. Inheritance taxes are imposed upon the individual receiving assets from a deceased’s estate. 

Thursday, April 17, 2014

Naming a Trust as Your IRA Beneficiary

Q: If I name my trust as my IRA beneficiary, can each of my trust beneficiaries stretch RMDs?

A: Yes and no. Yes, they can stretch RMDs but the stretch is severely limited, especially if you have trust beneficiaries with a huge age gap. Assuming the trust qualifies as “see-through,” at best, RMDs may be calculated based on the oldest trust beneficiary’s life expectancy.

Individual beneficiaries of a qualified trust cannot stretch RMDs over their individual life expectancies. Even though a “stretch” may be available, a multi-generational distribution opportunity is eliminated.

Q: Will the IRA distributions be taxed at trust rates or individual income tax rates?

A: That depends on the trust. Generally, a trust pays income tax on income held inside the trust. When RMDs are required to be paid immediately “through” the trust to individual beneficiaries, individual income tax rates usually apply. Trust taxation can be very complicated and trust terms vary so it’s important to consult with your personal advisors concerning any trust taxation questions you may have.

Q: My wife passed away and our trust is the beneficiary. The IRA custodian said the “5 Year Rule” applies, what does that mean?

A: The “5 Year Rule” means that the entire IRA must be fully distributed no later than December 31st of the fifth year following the year the IRA owner passes away. Basically, there are no RMDs since distributions are optional until the fifth year. Of course, any amount can be distributed anytime as long as the IRA is fully distributed by the 5 year deadline.

Q: I named my trust as my IRA beneficiary last year but I want my kids to have a multi-generational distribution opportunity. I paid a lot of money for my trust and I don’t want to pay more to have it amended, am I stuck?
A: No, you are not stuck and you don’t need to have your trust amended because you changed your mind on that issue. In this case, you can simply update your IRA beneficiary designation form by removing the trust as your IRA beneficiary and directly name your individual beneficiaries. A trust can be a great planning tool, especially for non-retirement assets, but always consult with your personal advisers to make sure your trust and your beneficiary designation forms are set up correctly to achieve your goals.

Monday, April 14, 2014

Correcting Retirement Plan Mistakes

Correcting Retirement

Plan Mistakes by the


Do you have an IRA, 401(k) or other retirement plan? If so, you know how easy it can be to overlook things like taking your first RMD or contributing too much to your retirement plan. The good news is it’s early in the year and there is plenty of time to mark your calendar and plan for 2014. In addition, there is still time to correct a few 2013 errors before the applicable deadlines.

The Deadline is approaching
Taking Your First RMD

Do you have a traditional IRA and turned 70½ last year? If you didn’t take a required minimum distribution (RMD) in 2013, you have until April 1st to take your very first RMD. The

IRS allows you extra time for your first RMD only, the standard December 31st deadline applies to all of your subsequent RMDs. If you delayed your first RMD and plan to take it by April 1st, keep in mind that you still must take your regular RMD for 2014 by December 31st.

Monday, April 7, 2014

7 Tax Facts From the IRS About Dependents and Exemptions

7 Tax Facts
From the IRS About
Dependents and

1. Exemptions cut income. There are two types of exemptions: personal exemptions and exemptions for dependents. You can usually deduct $3,900 for each