IRAs

7 Mistakes to Avoid When Naming Beneficiaries

7 Mistakes to Avoid When Naming Beneficiaries

“Probate” is a dirty word to most people.

Sure, sometimes it can be helpful. But you generally want to avoid it.

Think of it like the raw broccoli that for some reason is included on every party platter everywhere, but without the dip. No dip, just raw broccoli. Avoid. It.

One of the ways to avoid probate is by naming beneficiaries on your financial accounts and contractual policies.

In estate planning, a beneficiary is a person or entity who receives part of your estate after your death. You can name a beneficiary through your estate planning documents OR through a contract such as a life insurance policy, IRA, or agreement with your bank.

If you designate a beneficiary on an account or policy, then the assets or proceeds of that account or policy will pass directly to the named beneficiary, probate-free, after your death.

Sounds cool, right?

Right. It is very cool.

However, sometimes beneficiary designations can have unintended (and undesirable) consequences. Here are some mistakes to avoid when naming beneficiaries:

1. Not naming a beneficiary

This one seems obvious, but it’s worth mentioning because it is so easy to avoid.

If you do not name a beneficiary (or take other steps to avoid probate), you are virtually ensuring that your estate will be probated. And although probate is not the worst thing in the world, it is costly and time consuming. It is also usually avoidable.

Even if you believe all your accounts and policies have named beneficiaries, double check. Triple check. Check once a year. Do everything you can to make sure you don’t make the silly mistake of forgetting to name a beneficiary.

However, designating beneficiaries is not always as easy as it sounds…

Estate Planning for Young Professionals

Estate Planning for Young Professionals

If you are a young professional, estate planning is probably not even on your radar.

And why on earth should you have to think about it?

You’re young.

You don’t have many assets.

You’re single (and your grandma keeps reminding you about it).

Your family knows what you want.

You have other things to worry about.

You’re going to live forever.

However, estate planning is just as important (if not more important) for single young professionals as for older, wealthier, married-ier individuals.

But how do you create an estate plan? Where should you start? It’s a big question. Lucky for you, we have already done the heavy lifting. Here are 4 quick estate planning tips for young professionals:

1. Get a Durable Power of Attorney

In short, a Durable Power of Attorney is an estate planning document that gives someone (your “Attorney-in-Fact”) the ability to act for you in certain financial and/or medical situations.

“Why is this useful?” you may be yell-asking at your computer screen. And that’s a great question.

How much can you save for retirement in 2019?

How much can you save for retirement in 2019?

You remember that part of How The Grinch Stole Christmas (the Jim Carrey version, of course, because it’s the best one) where — spoiler alert — the Grinch realizes the true meaning of Christmas and his heart grows three sizes?

That basically happened in real life a few months ago, except instead of the Grinch it’s the IRS and instead of “Christmas” it’s “retirement savings.” (The heart-growing thing doesn’t really enter into it. Also Christmas was over a month ago. This was a bad analogy.)

Starting in the 2019 tax year (for filing in 2020), you can contribute even more money toward retirement accounts such as an IRA or 401(k). It’s a Christmas miracle!

Changes to IRA and 401(k) Contribution Limits

Below is a brief summary of the new inflation-adjusted numbers for retirement account contributions; see IRS Notice 2018-83 for more technical guidance.

401(k)s. In 2019, the annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan, is $19,000. That is up from $18,500 in 2018.

What is Estate Planning?

What is Estate Planning?

Most people have been told that they need an estate plan, but what exactly IS estate planning? What does it mean to have an estate plan, and why is it important to have one? Although estate planning is a very broad subject, it can be boiled down to this: An estate plan helps ensure that the proper people can take care of your SELF in the event of your incapacity and that the proper people get your STUFF in the event of your death. An estate plan includes several key aspects:

1. Formal documents

You have most likely heard of two very common estate-planning documents: a Last Will and Testament and a Living Trust. These documents say what happens to your STUFF after you die. Importantly, a Will is still subject to probate after your death; however, a properly funded Trust can avoid probate.

Use RMDs to Fund a 529 Account

Use RMDs to Fund a 529 Account

A 529 account (or 529 plan) is a tax-advantaged savings plan designed to encourage saving for future college costs. The different types and mechanics of 529 plans are best saved for another blog post. For now, the important thing to know is that there are three main benefits to using your RMDs to fund a 529 plan:

1. Earnings grow tax-free.

Usually, you have to pay income taxes on RMDs. If you then invest the RMD, you will likely pay a second round of taxes on those earnings down the road. On the other hand, if you contribute your RMD to a grandchild's 529 account, you will still pay income tax on the RMD, but the money you invest in the 529 account will grow tax-deferred. And if the money is later used for qualified education expenses, the entire amount is available tax-free.

Reduce Taxes by Making a Charitable Distribution

Reduce Taxes by Making a Charitable Distribution

If you have not already taken your required minimum distribution (RMD) for 2017, you may want to consider making a qualified charitable distribution (QCD) through your IRA. Of course, before doing so, you want to know the answer to one important question: Would you benefit from making a QCD? If you fall into one of the following categories, the answer may be "yes":

1. You have a high adjusted gross income.

Some expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income (AGI). For instance, miscellaneous itemized deductions must exceed 2% of AGI to be deductible; medical expenses and casualty losses must exceed 10%. QCDs can reduce AGI by taking the place of otherwise taxable RMDs, meaning it may be possible to lower your threshold for deducting certain expenses.

Will an IRA affect my estate plan?

Will an IRA affect my estate plan?

Even if you set up a trust, you will continue to individually own your IRA and list individual beneficiaries for it. Your trust cannot be the owner of your IRA, and naming your trust as the beneficiary of your IRA accounts can be complex. However, your IRA can be an important part of your estate plan, so it is important to understand what options are available and what you can do to provide the maximum benefit to you and your loved ones and other heirs.

How can I make my trust a beneficiary of an IRA?

If you do want your trust to be the beneficiary of an IRA, it is important that the trust qualify for the “look-through” rule. This rule says that the IRS must be able to determine whether there is a designated beneficiary and who that beneficiary is. The four requirements that the trust must satisfy are as follows: