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Wisely Select Your IRA Beneficiary

If you have spent your working and pre-retirement years pouring into, rather than having to tap into, your retirement savings, congratulations! You’re on your way to being set up for success. Before kicking back and relaxing, though, it’s worth conducting a review to see how you’ve set up the beneficiary on your IRA. There are possible estate tax and income tax risks for you and your chosen beneficiary.

Wisely Select Your IRA Beneficiary
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For non-Roth retirement accounts, you’ll want to factor in how long the beneficiary will push off distributions, the required minimum distributions, and the possible income tax bracket for that individual. All of these factors ca give you a window into the tax liability for the beneficiary. The majority of the time, RMDs will kick in pretty soon after a retirement plan is inherited. That depends on the oldest beneficiary, however, so the younger your beneficiaries are, the better off they’ll be. With smaller RMDs, there’s better opportunity for them to benefit from tax-deferred growth in the retirement account they are inheriting.

If you list your spouse as the beneficiary, which many people do, bear in mind that this could will increase their own taxable estate (although you’ll be able to transfer to your spouse estate tax free). Any beneficiaries outside your spouse will probably mean that your retirement account is included in your estate. Have you considered Stand Alone Retirement Trust? To learn more about the best planning strategies for your retirement account and asset protection needs, send us an email to info@lawesq.net or contact us via phone at 732-521-9455 to get started.

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Planning for an Abroad Retirement? Keep These Tips in Mind

A growing number of people are hoping to cash in on their retirement dreams by living abroad. Many retirees even keep their U.S. bank accounts and simply set up plans to live abroad, and retiring in another country and help to significantly reduce retirement expenses. In some cases, retirees may even be able to live abroad on just $25,000 a year.

Planning for an Abroad Retirement Keep These Tips in Mind
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You’ll need to be prepared to set up a new bank account abroad so that you can meet routine expenses. It’s also a very wise move to check out what link you’ll be using to transfer funds from U.S. accounts. Without doing your research, you might find that you’re hit with extremely high fees for transferring to another bank and especially into another currency. You must be prepared with a strategy to monitor currency risk, since whether it makes sense to convert assets over or keep them in your home currency largely depends on the market.

You also want to factor in taxes. You’ll have to keep filing a U.S. tax return and probably another one in your new country. The IRS will generally give you credit for taxes that you have paid abroad, but that is not true for all cases. You’ll want to set up a personalized meeting with an estate planning specialist before banking on paying foreign taxes only.

Finally, plan for healthcare. Many retirees look for a location that has access to quality and affordable healthcare. Locations far out from medical services can be a hassle for retirees, who are more likely to need routine care. Talk more about your plans to live abroad with an estate planning attorney so that you are prepared to go when it’s time. To get started fleshing out your overseas retirement dreams, contact us at 732-521-9455 or email us at info@lawesq.net

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The Fifteen Best Countries for Overseas Retirement in 2014

It is not uncommon for Americans to spend significant time away from their home state in order to take advantage of more favorable living conditions. Be it to live for less, for diversity investments, or to simply enjoy one last adventure, more and more Americans are choosing to retire abroad. A recent article discusses the 15 best countries for Americans to retire in 2014.

The Annual Global Retirement Index created the list based on a series of factors, including the price of necessary goods and services such as groceries and utilities, average temperature, and friendliness of the locals. As executive editor Jennifer Stevens explains, the list is “designed to be a real-world snapshot of the places we deem most worth a potential-retiree’s attention today.”

English: View of the Chagres River in Gamboa, ...
English: View of the Chagres River in Gamboa, Panama. (Photo credit: Wikipedia)

Topping the list for 2014 is Panama. As Stevens explains, Panama offers American retirees a “great combination of variety and value…No matter what it is you’re hoping to find, Panama is a good place to look for it.” The remaining rankings are as follows: (2) Ecuador, (3) Malaysia, (4) Costa Rica, (5) Spain, (6) Colombia, (7) Mexico, (8) Malta, (9) Uruguay, (10) Thailand, (11) Ireland, (12) New Zealand, (13) Nicaragua, (14) Italy and (15) Portugal.

Taking advantage of overseas options does not always mean changing your place of residence, but precautions should be taken to make sure that your estate plan is appropriately adjusted for your travel. To determine your unique considerations before booking your tickets, consult with a qualified estate-planning attorney.

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Avoid These Common Estate Planning Mistakes

Estate planning is a field fraught with pitfalls. All too often, estate planning mistakes are discovered after the person who created the estate plan has passed on, so he or she cannot fix the problem or explain his or her intentions. A recent article discusses several estate planning mistakes to avoid.

Naming Special Needs Minors or Adults as Beneficiaries
This is often problematic because special needs individuals often receive benefits from the government. However, most of these benefits are needs based, and may cease if the individual receives a large inheritance. Therefore, gifts to special needs individuals must be structured in a way – such as a trust – that keeps them out of the immediate control of the individual.

Failing to Name a Contingent Beneficiary
Failing to name a contingent beneficiary becomes problematic when the primary beneficiary either predeceases the person who created the estate plan, or disclaims his or her share. In either situation, if a contingent beneficiary is not named, the share would pass in accordance with the intestacy statute under state law.

Naming Your Estate As The Beneficiary on a Retirement Plan
When an individual receives the proceeds of a retirement plan after the death of the plan owner, he or she can take advantage of special IRA “stretch out” provisions. Using these provisions, the beneficiary can structure the inherited IRA to receive distributions throughout his or her life. These provisions do not apply when the beneficiary on the plan is an estate.

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Safeguard Your Wealth for Retirement

It is never too early to start planning for a long and comfortable retirement. A major part of retirement planning is safeguarding assets from the uncertainty that life often brings. A recent article shares some tips for protecting retirement savings from potential liabilities such as lawsuits, while also ensuring that there is money available to you when you need it.  Here are some important takeaways:

retirement
retirement (Photo credit: 401(K) 2013)

Schedule Your Assets Based on Your Financial Timeline
People often protect their wealth by putting it in investments or policies that they will not be able to access for a number of years. While this is typically a great way to keep assets from creditors, it may become problematic if a person needs access to the money. Therefore, it is wise to schedule your investments and policies so that they become due at various, critical times in your life, such as when your children go to college or when you plan to retire.

Be Risky, Within Reason
Risky maneuvers, such as putting money into the stock market, can often pay off where financial planning is concerned. However, too much risk can lead to disaster as well. In order to safeguard the bulk of your retirement savings, you may consider secured-return investments such as a fixed indexed annuity. Place a much smaller portion into vulnerable investments and securities.

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The Phases of Retirement

Too many individuals find themselves altogether unprepared for retirement. The difficulties that this unpreparedness creates are compounded by the fact that, with longer life expectancies, retirement is longer than individuals had originally anticipated. A recent article discusses how people can plan for the three phases of retirement.

Retirement
Retirement (Photo credit: 401(K) 2013)

The Early Years

Because Americans are living longer than ever, many will have to avoid pulling benefits from social security until it is absolutely essential. A person who delays taking his or social security withdrawals beyond his or her full retirement age will receive a benefit increase from 6% to 8%. Importantly, those who delay accepting social security benefits may need to sign up for Medicare at age 65 to reduce the cost of long-term health insurance down the road.

The Middle Years

After a person reaches age 70 ½, traditional IRAs and employer-sponsored retirement plans will require that person to begin taking annual withdrawals. Often, these plans have a steep penalty for those who do not take the withdrawals. Conversely, Roth IRAs don’t require individuals to make withdrawals during their lifetime. Therefore, for those who do not anticipate needing such withdrawals, a Roth IRA is a good option.

The Later Years

In the later years of retirement, estate planning becomes paramount. It is important to review all financial documents to ensure that they still align with your wishes. Moreover, many people experience changes in their circumstances as they age. It is important to be sure that these changes are accounted for in your estate plan.

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Protecting the Nest Egg: Asset Protection for Retirement

By the time a person retires, he or she should have created an asset base that is sufficient to allow him or her to retire without dramatically reducing his or her standard of living. Moreover, most individuals would also like to pass down assets to the next generation. As a recent article explains, those who succeed in creating a sufficient asset base for retirement need to be careful to protect it from any liability that may arise down the road.

Asset protection strategies cannot fully protect all assets from all claims. However, a good asset protection strategy can effectively reduce threats to many assets, such as real property, investments, businesses, and various other assets.

Nest egg
Nest egg (Photo credit: Gemma Garner)

One common asset protection strategy is holding property under Tenancy by the Entirety. This is a type of co-ownership that is available exclusively to married couples. Couples who own asset(s) through Tenancy by the Entirety each have a right of survivorship, meaning that the surviving spouse automatically takes the deceased spouse’s share. In certain states, assets held in this form are protected from lawsuits that fail to name both spouses as defendants.

Another common asset protection strategy is transferring the ownership of assets to a limited partnership. Limited partnerships are popular for holding investments and liquid assets. In order to form a limited partnership, you need one or more general partners, and one or more limited partners. These particular strategies will allow for the effective protection of assets for retirement. 

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Can’t Touch This: Asset Protection is Important for Everyone

Asset protection strategies are vital in protecting a person’s ability to retire comfortably. Without these strategies, a person’s assets could easily be put at risk based on unexpected personal liability. As a recent article explains, when implementing asset protection strategies, it is best to err on the side of caution.

As the number of lawsuits filed in the United States continues to grow, so does the potential liability of every American citizen. No line of work or business is unexposed. Unfortunately, most people do not realize that they are exposed to liability. Moreover, even if a person understands that he or she is exposed to significant liability, it is next to impossible to estimate the value of damages that may be awarded against them in a lawsuit. For example, a person awarded one dollar in actual damages may be awarded millions of dollars in punitive damages.

Asset protection allows a person to protect his or her home, business, and various other assets from unexpected claims or lawsuits. Although a person can never fully protect his or her assets, they can take steps to minimize potential lawsuits, their financial impact, as well as possibly negotiate a better settlement.