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Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Volume Eight Number Eight August 2010

Estate Planning and Qualified Retirement Plan Assets

Beneficiary Designations 101

Beneficiary Designations      There are two things you should never watch while they are being made: one is sausage and the other is tax law. The same can be said of most tax law changes. They often result in more complex rules and regulations, not to mention stiff penalties for non-compliance.
     That said, the IRS has simplified its regulations governing distributions from IRAs and other qualified retirement plans (QRPs) in recent years. In form, these final regs are intended to liberalize and lengthen payout options during the lifetimes of plan participants and, after their deaths, for their designated beneficiaries under such plans. In substance, however, there are many common pitfalls you need to avoid regarding the designation of beneficiaries for your QRP … or your retirement assets may either plunge into the tax abyss quicker than otherwise required, or even wind up with the wrong beneficiary.
     Disclaimer: This article is not an exhaustive treatise on this subject matter. Consider it a brief primer regarding the unique nature of QRPs and an advance warning to avoid two common pitfalls regarding their post-mortem transfer.

Learn more about choosing a beneficiary when it comes to your qualified retirement plan...

Pension Maximization

Pension Maximization That long-awaited day will soon be a reality. Yes, your retirement ship is almost ready to set sail. Before you climb aboard, however, there are a few crucial decisions to make regarding your pension, especially if you are married. To assist you in this process, we will consider your general options, propose a common win-win alternative and then temper that alternative solution with some due diligence.

Defined Benefit Plans: Your General Options

If you have a defined benefit plan (i.e., a retirement plan through your employer that will pay a monthly income to you), then you will be asked how you want the payouts calculated. For example, do you want payouts to be calculated to last as long as you live (single life option) or until the later of your death or the death of your spouse (joint and survivor option)? This decision must be weighed very carefully.
If you choose a single life option, then the monthly payout will be higher … but it will end upon your death. This could leave your surviving spouse without needed income. On the other hand, if you choose the joint and survivor option, then the monthly payout will be reduced to cover the actuarial risk of the payouts extending over an additional life. Nevertheless, with the joint and survivor option, if your spouse predeceases you, then you are stuck with the lower payout for the rest of your life.

Read on for the proper steps to take to maximize your pension payment...

Did You Know?

Did you know that:

While three in ten Americans DO have a plan, the average age of a will coming into a law office for update or probate is nearly 20 years?
A Power of Attorney of similar vintage may be rejected by banks and other third parties?
In three out of four cases, a Health Care Directive (also sometimes called a "Living Will") is unavailable when needed?
Nine out of ten Americans MISTAKENLY believe that life insurance proceeds are automatically exempted from Federal Estate Tax?
The Wills of most married couples control ONLY personal effects?
There are legitimate means of leveraging the $13,000 annual gifting exclusion, of avoiding capital gains tax on super-appreciated low-yield assets, and of ensuring that 99% of assets flow to the next generation in a thoughtful, protected manner?

Is it Time to Review Your Plan?

Retirement Distribution Help

If you want to watch your computer melt before your very eyes, then use your favorite internet search engine to search the world wide web for information about “retirement distribution planning.” You will register in excess of 640,000 hits! That can be overwhelming, especially when you are looking for practical, plain-English answers.
Here are three tips to help you navigate these important decisions. First, since your retirement funds represent just that–your retirement funds–be very selective regarding the financial advisors you hire to help you make it last (and maybe even grow). If you do not have a financial advisor, contact us and we will help you make the right connections. Second, make sure your estate plan is coordinated with your financial plan ... and that both are coordinated with your retirement distribution plan. Third, and finally, do not try to go it alone when it comes to these important decisions. Otherwise, you may pay too much in taxes, disinherit your loved ones or even run out of money.

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