1. Estate Planning Pitfalls of
Retirement Plan Distributions
2. Focus on Fraud: Corporate &
Identity Theft, Part 14 - Notes
3. Tech Tip Weekly: Converting
Formulas to Values
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further information on any of these articles, let us know. We
would appreciate receiving your comments and/or suggestions, anytime!
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1. Estate Planning Pitfalls of
Retirement Plan Distributions
Because retirement plan distributions are the most
valuable asset in many estates, particular care must be exercised. Unlike
other estate assets, income tax planning is as important, if not more so, than
estate tax planning.
No. 1 - Equalizing Spouses Estates
Particular attention must be paid that a
beneficiary designation doesn't offset the balancing of the estate so the
estate can't take full advantage of the unified credit amount.
No. 2 - Improper Beneficiary Designation
Failure to name contingent beneficiaries and
update beneficiary designations. They will name a beneficiary, the spouse, but
will usually not name a contingent beneficiary, which means if the beneficiary
dies first and they haven't named a new one, the IRA ends up in the estate.
That is the last thing that you want, as you have
to distribute IRA proceeds to heirs of the estate within one year and don't
get the benefit of stretching it out over a longer period. Another problem
with beneficiary designations, is if there is a divorce, and the
designation of the ex-spouse as beneficiary isn't changed, he or she receives
the distribution.
No. 3 - Procrastination Becomes Failure to
Act
Procrastination often really complicates things,
as effective planning can't be done at the last minute.
No. 4 - Not Rolling Over
Upon retirement or termination of employment, some
participants leave their money in a 401(k) plan. The problem with leaving the
money in is that generally the plan is not going to stretch out the payments
beyond a five-year period. So in particular for a nonspousal beneficiary, the
income tax can not be deferred as it could with an IRA for the beneficiary's
life expectancy.
No. 5 - Investment Mix and Objectives
Conflict
The asset mix must be closely monitored especially
upon retirement. There are a number of factors to consider, including when
will the money be needed, and if the intention is to pass the assets to heirs
and, of course, the various tax and non-tax ramifications of required minimum
distributions.
No. 6 - Fear of Roth
Some individuals shy away from even considering
whether conversion of a traditional IRA into a Roth IRA makes sense. If
eligible, Roth conversions are a very powerful tool with the low income tax
rates that we have right now.
No. 7 - Taking it All Out
On death a beneficiary can quickly unravel an
estate plan by immediately withdrawing all of the money from the qualified
plan or IRA. People need to be advised about the benefit of retaining as much
tax deferral as possible.
No. 8 - Rushing a Spousal Rollover
An example is a husband who dies with an IRA and
his wife is age 50 at the time. She makes an immediate rollover into a spousal
IRA. Every time she needs to take out money to support her lifestyle, it is
subject to a 10-percent penalty. Also, only a portion can be rolled over to a
spousal IRA.
No. 9 - Failure to Stretch Out
The golden rule is to try to stretch out payments
so the income tax can be deferred as long as possible. In the case of
beneficiary designation, this is done by naming younger beneficiaries,
grandchildren instead of children.
On the death of the participant, for a limited
time, the estate can break the IRA into individual IRAs for the
beneficiaries. If the IRA is left as is, income taxes can only be deferred
for the life expectancy of the oldest child.
If the IRA is broken up, the measuring period for
each of the IRAs is the life expectancy of the child that is the beneficiary
of that IRA.
No. 10 - Not Using a Trust; Using the
Wrong Trust
There are times when the best thing is to have the
payments made to a trust. A good example is when there is a beneficiary with
bad spending habits and they offer creditor protection.
Many IRA custodians do not allow per stirpes
distributions. In those cases, if three children are primary beneficiaries
and one dies, his or her share doesn't go to any surviving grandchildren, but
the deceased primary beneficiary share goes to the two other primary
beneficiaries.
If the IRA payments are to a trust, care must be
taken so there are no adverse income tax consequences. If the wrong type of
trust is used, it might interfere with required minimum distributions.
2. Focus on Fraud: Corporate &
Identity Theft, Part 15 - Notes
Legal Requirements for Businesses – More on GLB
Gramm-Leach-Bliley Act enacted 11/12/1999 to reform financial services
industry is most comprehensive
GLB Safeguard Rule enacted 5/23/2003 implemented safeguards of the GLB Act
Defines “confidential information” as any personal
information given by an individual to obtain financial, healthcare, or other
product or service, including
Name
Address
SSN
mother’s maiden name
bank account numbers
credit card numbers
drivers license information
or other information used on an application or
used in any financial
transaction
Requires defined financial institutions to develop information
security programs
and to train and designate employees to coordinate
them
But, does not stipulate what constitutes the required information
security program
or what is to be included in the training
Does require institutions to
Give customers privacy notices
Provide customers opportunity to decline having their
information shared
with third parties
Avoid releasing personal information to unauthorized
users
Assure accuracy of it before releasing it
Disclose to the consumer recipients of any released
information
Identify internal and external risks to security
Develop and implement information security programs
All of this is very superficial, though
Part 16 – Notes . . . next week Legal Requirements for Businesses – Many
Superficial Laws
3. Tech Tip Weekly:
Converting Formulas to Values
Sometimes in MS
Excel, you may want to convert a formula to its current value (remove the
formula and leave only the result). You may, for example, want to prevent
future changes to the value of a cell if other cells that the formula
references change.
To convert a
formula to its current value, follow these steps:
-
Select the cell that
contains the formula. To convert several formulas, you can select a range.
-
Choose Edit, Copy from
the menu bar.
-
Choose Edit, Paste
Special.
-
In the Paste Special
dialog box, select the Values option button.
-
Click OK.
-
Press Enter to cancel
Copy mode.
This procedure
overwrites the formulas. To put the current values of the formulas in a
different (empty) area of the worksheet, select a different range before Step
3 in the list.
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