Posts Tagged ‘beneficiaries’

Minimum IRA Withdrawals

Posted on: April 26th, 2010 by

Financial Planning - Rockville, MDAfter reaching age 70 1/2, owners of traditional IRAs fall victim to the required minimum withdrawal rules. You must take annual withdrawals of specified amounts (at least) and pay the related federal and state income tax hits. Thankfully, if you own a Roth IRA, it’s exempt from the required minimum distribution rules for as long as you live. So if you own nothing but Roth IRAs, you can skip this article.

Beneficiaries of inherited traditional and Roth IRAs fall under a separate set of required minimum withdrawal rules.  Failure to withdraw at least the required amount for the year means getting socked with a 50% penalty on the difference between what should have been withdrawn and what is actually withdrawn (if anything). This is one of the most brutal penalties in our beloved Internal Revenue Code.  You should speak with your financial planner about your retirement planning if you don’t have a plan yet or about converting your old plan to a Roth IRA.

Things to Remember About Estate Planning

Posted on: April 19th, 2010 by

Estate Planning - Rockville, MD“In this world nothing can be said to be certain, except death and taxes.”  – Benjamin Franklin

Benjamin Franklin makes a very astute point that the problem is death and taxes.  While facing your own mortality is not the most pleasant thing, it is something you must do and estate planning is very important, especially to those you leave behind.  The first thing you must do is prepare a will.  Dying without one is probably one of the messiest mistakes you can make – people argue, mud gets thrown, and all of it could have been easily avoided.  There are many things to consider in your will, including who will care for your children, what to do if you get put on life support, and ultimately, who will get what.  Resolving these issues now will prevent a lot of problems later.

Details, details, details… they are of the utmost importance in estate planning.  There are many obvious details, like funeral planning or finding a guardian for living dependents, but there are easily overlooked ones as well.  Make sure that you have appropriately (and are up to date on) assigned beneficiaries for your retirement accounts.  Also, you need to choose a reliable executor and set up a durable power of attorney to direct assets and investments.

Make sure that you have an adequate amount of life insurance.  If your estate doesn’t amount to enough to replace your income  in terms of supporting your family, then the death benefit from an insurance policy may be the answer.  You need to calculate how much yearly income you will need to replace to determine how much insurance you will need to carry.  Remember to reassess your calculations though as your financial situation changes.  As your situation changes, so should your policy.

Although many of these things can be done on your own, if your estate is complicated, you may want to consider consulting with an accountant, estate planner, or estate lawyer to resolve any possible tax issues now.

Handling Beneficiary Designations

Posted on: April 8th, 2010 by

Financial Planning - Rockville, MDThe decision about how to designate beneficiaries for retirement plans, insurance policies, and other assets may seem like a very simple decision.  Chances are, you want your closest loved ones to to inherit any money you have accumulated during your lifetime, so just putting their names down on the appropriate forms should be the end of it, right?  Wrong.

You can name just about anyone or anything as your beneficiary, including individuals, charities, and trusts.  And when you name a beneficiary, those assets pass directly to whomever you designate without having to go through probate.  In addition to this though, remember that your beneficiary designations will override any bequests you have in your will.  So always make sure that your beneficiaries match up to your will.

The first common mistake people make is not re-assigning beneficiaries after they tie the knot.  There are major life events at which you should always review your beneficiaries: marriage, death, birth of children, and divorce.  Estate planners and financial advisers alike will advise that you make it a point to review assignments upon annual review of your finances to make sure that everything lines up and is copacetic.  By the same token, you’ll also want to review your beneficiary designations if you or your employer has recently changed retirement plan or insurance providers, as your beneficiaries may not carry over to the new policy automatically.

Before you make your beneficiary designations, you need to understand the tax ramifications the inheritance may cause for them.  If you are leaving your retirement plans to someone other than your spouse, you should sit down with them and an accountant and discuss how and when the money would get distributed (This will weigh heavily on the determination of the tax burden).   If you leave it to your spouse, however, they can more than likely roll it over into their own IRA and not have to pay taxes on it until the funds are distributed.  You also need to consider that leaving money to someone is considered income and you may be effecting their eligibility for government assistance if you leave them funds.  You must also keep in mind estate taxes: they will have to be paid by someone.

You also need to be very specific as to how you want your estate distributed.  You may think your beneficiary will just know what to do with your money, but they don’t.  You are, in most cases, allowed to name multiple beneficiaries and contingent beneficiaries and specify what percentage of your estate they will receive: take advantage of this.  Don’t just assume that estate planning is for the uber rich;  everyone needs a plan.

CPA Rockville – Stay Ahead of Healthcare Reform

Posted on: March 25th, 2010 by

Rockville CPA - Free Healthcare is ExpensiveCPA Rockville – Want to stay ahead of the health care “side car” bill?  Here are a few things to keep in mind:

1) Watch for coverage changes.  If you’re uninsured and have health problems, you may become eligible for a new federal high-risk insurance pool this year.  Watch for information at

2) Find a doctor now.  There could be shortages, as the reconciliation bill is ultimately expected to add 32 million people to the insured population.

3) Consider long-term care coverage.  Under the new provision, a new voluntary long-term care benefit that would pay cash out to people who become disabled will become available.  You will only get the benefit if you have paid premiums into the program for at least 5 years, and this probably will not become available until 2011 at the earliest.  Again, watch for info at

4) Plan ahead for new tax rules.  There will be a new 10% levy on indoor tanning services starting in July.  Also, a $2,500/year cap will be placed on allowable contributions to a tax-free flexible spending account in 2013 (it was 2011 in the original Senate bill).

5) Prepare for Medicare changes.  Beneficiaries who pay for drugs in the doughnut hole coverage gap are eligible for a $250 rebate in 2010.  In 2011, that group will get 50% off brand name drugs, and after that the hole will get a little smaller each year, and should effectively be zeroed out by 2020.  In 2011, certain preventive care will be free as well.

6) Be prepared to be insured by 2014.  If you are uninsured, by 2014, you will likely be required to have insurance or pay a penalty.  You should start preparing yourself now for that additional cost in your budget.  Contacting a financial planner in Rockville now, may help you be ready by then.  Medicaid is going to be expanded to include lower incomes.  For those who make less than $43,000/yr, there will be government assistance to help buy a plan.

Rockville, Maryland – What Is Estate Planning?

Posted on: March 15th, 2010 by

Rockville, MarylandRockville, Maryland – Although, one’s estate can most easily be defined as his or her property, there is no precise definition for estate planning.  It is, generally, a series of steps to be taken so that when you die, your property will be handled in a way that reflects your values and wishes regarding your survivors and any charitable interests you may have.

A good estate plan is designed to bring reality in line with your desires to the greatest extent possible, given the limitations and practical problems you may face.  The drafting of this plan will usually include candid family discussions, drafting a will and trust, changing the designated beneficiaries on certain accounts, buying life insurance (and which type to buy), etc.  As for limitations or “problems”, the most common include insufficient money to fund all of your goals and survivors who do not act as hoped or expected.

The most important thing to remember is that an estate plan needs to be given adequate thought and consideration.  If you hire the best estate planner in Rockville, MD for you, who has your best interest in mind, the process is not as daunting as you may fear.