Financial Planning Category Archives

Leaving an IRA to a Trust

Published on: October 10, 2024 | by Ettinger Law Firm

An IRA may not be transferred to a trust without causing the whole IRA to be taxed. The “I” in IRA stands for “individual” — it must be owned by a single person. In practice, there is no need to transfer an IRA to a trust since IRA’s avoid probate by having a “designated beneficiary” and the principal of an IRA is exempt from being “spent down” for your long-term care needs. However, an IRA may be left to a trust. In other words you may name a trust as a designated beneficiary of an IRA.

There are many reasons why one would want to leave an IRA to a trust. The beneficiary may be a minor, they may be irresponsible, have substance or alcohol abuse issues, learning disabled, special needs, dominated by a spouse, facing divorce or bankruptcy, or you may simply want to control where the IRA money goes if your designated beneficiary dies before the IRA is completely distributed. Similarly an IRA is often left to the Inheritance Protection Trust to protect it from your child’s divorces or creditors and to keep the asset in the bloodline.

There are two types of trusts that may be named a beneficiary of an IRA — “conduit” trusts and “accumulation” trusts. A conduit trust simply acts as a conduit of the ten year payout under the SECURE Act. In other words, whatever is taken from the IRA must be distributed immediately to the trust beneficiary, the trust acting as a conduit only.

The Secure Act and Your IRA

Published on: November 2, 2022 | by Ettinger Law Firm

The Secure Act governs distributions from IRA’s and other retirement plans. After the death of the account holder, most named beneficiaries are required to take the funds out over ten years.

While the IRS has not finalized the regulations, the safest approach is to take minimum distributions for the first nine years, based on the life expectancy of the beneficiary. More may be taken, and taxes will be based on that amount. The way the minimum distribution works is as follows. Let’s say the beneficiary has a life expectancy of forty years when the account holder dies. In the year following the account holder’s death they must take one-fortieth, the following year one-thirty-ninth, and so on until year ten when they are required to take the retirement account balance in full.

There are a few exceptions to the ten year rule. Spouses may roll the inherited IRA into an IRA of their own and continue it for their own lifetime — generally waiting until they are 72 to start taking required minimum distributions (RMD’s) unless they need the funds earlier.

Remember to Learn Your Parent’s Finance Plans

Published on: June 12, 2022 | by Ettinger Law Firm

The unfortunate truth is that everyone’s parents will ultimately pass away even though the average life expectancy is increasing. While some of our parents pass away while we are children, other people lose their parents when they are adults. Even though this is a grim reality, it is best to prepare for this eventuality. Because you can lose a parent at any time, you should do everything possible to prepare for this occurrence. It’s important to know just why but also how and what to talk about with your parents when it comes to estate planning.

Why These Conversations Are Important

Without documenting plans for your parent’s approach to what will happen after they pass away, you can end up in a difficult situation. Without access to your parent’s funds, you might be left to pay for the various costs they leave behind when they pass away. Unfortunately, this means that some caregivers end up spending their own money in these situations. Besides the additional costs, your parent’s end-of-life plans are also less likely to be achieved. Having conversations about these matters before your parent passes away or becomes incapacitated makes sure you’re able to tackle these issues.

Taking the Time to Begin (And Complete) Your Estate Plan

Published on: May 5, 2022 | by Ettinger Law Firm

One unanticipated effect of the Covid-19 pandemic is it made many people realize that time is short. If you delay doing something too long, the risk exists that you might never have the chance to do it. Many people are following this advice when it comes to things like changing jobs, divorcing, and purchasing homes. Estate planning, however, works just the same way.

The Covid-19 Pandemic and Estate Planning

People who delayed estate planning during the Covid-19 pandemic realized just how important it was to create estate plans. This trend continues even though the height of the pandemic has passed. There are some people unfortunately who despite their best effort cannot finalize their estate plans. These individuals begin the estate planning process but then stop. Sometimes, these people try to pick up and complete estate planning months or even years later. These individuals often find themselves simply overwhelmed with the number of choices that must be made in the estate planning process. Other times, people are simply confused about what estate planning strategy works best for them. Additionally, many people resist having to confront their mortality and accept that one day, they simply will not be alive.

Social Security in 2022 and Beyond

Published on: April 10, 2022 | by Ettinger Law Firm

The Social Security Program is 86 years old and has become a fundamental aspect of how many aging people pay for expenses. Despite its vast importance, social security is full of challenges and weaknesses.

Estate planning professionals once referred to a “three-legged stool” for retirement planning in this country. The three legs included a pension, personal savings, and Social Security payments. Pensions that secure income is not nearly as common as they once were. Furthermore, a very small portion of people in the United States has support from each of these three legs.

Since 1940, however, Social Security has remained a steadfast source of payment. Many people, however, are uncertain about the program’s future. While the program’s demise is not granted, Social Security’s funds are certainly on a downward trend and they must be fixed if they’re to last. If Congress fails to take action, very soon Social Security might lack the funds to pay its promised benefits.

What Should You Do After a Loved One Passes Away?

Published on: March 14, 2022 | by Ettinger Law Firm

When a person passes away, survivors almost always remember the need to take several important actions. Often, some of these actions are time-sensitive and must be performed within a narrow time window. Given the substantial emotional repercussion of losing a loved one, the process is often overwhelming and can even be difficult to navigate. To better prepare you for what happens after an elderly loved one passes away, this article reviews some important steps that you will likely need to take or at the very least consider taking.

Actions Immediately After a Loved One’s Death

Many people find themselves in shock immediately following a loved one’s death. During this period, it’s critical, however, to take some important steps, which include the following:

Taking the Time to Review or Create an Estate Plan

Published on: February 12, 2022 | by Ettinger Law Firm

Each year, it’s important for anyone interested in planning for the future of their assets to either create or revise their estate plan. Taking the time and including loved ones in estate planning discussions is the best thing that you can do to avoid conflict or estate planning disagreements.

Estate planning involves planning for the use of your assets after you become incapacitated or pass away. While many people think that estate plans are written in stone, this is not the truth. In actuality, various life events including births and divorce should lead people to review and ultimately revise the terms of their estate plan.

Acknowledge What You Own

Avoiding Undesirable Estate Planning Situations

Published on: February 12, 2022 | by Ettinger Law Firm

TV shows often depict unpleasant estate planning situations that can arise including a deceased person leaving assets to a former spouse. While these situations often do not occur in the way depicted on TV or film including the recent Netflix film I Care A Lot, a former spouse could end up receiving assets from your assets or other undesirable situations can occur if you are not careful.

For a large number of people in New York as well as the rest of the country, estate planning documents including wills and trusts are a person’s final communication with their loved ones as well as the rest of the world.

Make Sure to Revise Your Estate Plan

The Advantage of Utilizing SPA Trusts in Your Estate Plan

Published on: February 1, 2022 | by Ettinger Law Firm

In times of economic uncertainty, estate plans can benefit substantially from flexibility. As the country both continues to recover from the COVID-19 pandemic as well as face the challenges brought on by new strains of COVID-19, it’s a good idea to consider how to make your estate plan flexible. Not to mention, looming changes brought on by changes to tax law also make it a good idea to consider flexibility while creating an estate plan.

What SPA Trusts Do

Special power of appointment (SPA) trusts (or as they are sometimes called SPAT trusts) is a type of irrevocable trust in which either the creator or settlor of the trust grants appointment power to another person. The person who receives these powers functions in a non-fiduciary role to direct the trustee to make distributions to anyone except for the person who made the appointment of powers.

Considering Medicare Advantage Plan Alternative

Published on: February 1, 2022 | by Ettinger Law Firm

Approximately, 26.9 million Americans are enrolled in Medicare Advantage Plans as of January 2022. While many people are content with their plans, not everyone is. Individuals have between January 1, 2022, to the end of March 2022 to make revisions to their Advantage Plan. During this period, a person can also drop a Medicare Advantage Plan and opt for a basic Medicare plan, which includes Part A and B.

Individuals should be aware of some important details before switching Medicare plans, though. For one, people can change plans early in the year. For example, a person might discover that their Medicare plan no longer covers important medication.

The Narrow Window to Change Plans