Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

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Wednesday, April 16, 2014

IRS Gives Guidance on Same-Sex Marriage Recognition for Retirement Plans

RingsThe IRS has issued guidance on the effect the Windsor decision has on marriage recognition for retirement plans. In light of Windsor striking down Section 3 of DOMA, the question arose of how retirement plan benefits that hinge on the recognition of a legal marriage should be handled.

In Notice 2014-19, qualified retirement plan administrators must amend retirement plans to recognize legal marriages of same-sex couples as of June 26, 2013. However, retroactive recognition prior to that date is not required.  Recognition can be limited to couples that are domiciled in states that recognize their marriage for plans dated June 26 – Sept. 16, 2013, but all valid marriages must be recognized after Sept. 16, 2013, even if the couple is no longer domiciled in a state that recognizes the marriage.

See Alistair M. Nevius, Guidance Issued on Application of Windsor to Retirement Plans, Journal of Accountancy, Apr. 7, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

April 16, 2014 in New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 15, 2014

The Road to Retirement


The path to retirement can be difficult.  Here are eight rules of the road that can help you stay on track towards achieving your long-term goals:

  1. Try and save 10-15% of your income each year and make sure and get any company match.
  2. Don’t be too risk averse with your investments.
  3. Maximize the use of tax-advantaged accounts like IRAs, 401(k)s, HSAs, or deferred annuities.
  4. Plan on needing 85% of your preretirement, after-tax income when in retirement.
  5. Aim to earn at least eight times your ending salary before retirement.
  6. Construct a financial plan that can be successful even if returns are way below average.
  7. Consider building some inflation protection into your portfolio.
  8. Cover essential expenses in retirement with guaranteed income from Social Security, pensions, and annuities.

See Fidelity Viewpoints Team, 9 Rules of the Road to Retirement, Forbes, Apr. 15, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

April 15, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Saturday, April 12, 2014

CLE on Business Succession Planning

CLE PhotoThe American Law Institute Continuing Legal Education (ALI CLE) is presenting a CLE entitled, Business Succession Planning: Vintage Issues in the New Paradigm, on Monday, April 14, 2014.  Provided below is a description of the event:

There are some key questions that must be answered early in the development of a family-owned company: 

  • What are the goals and objectives of the business-owning family?
  • Should the business stay in the family?
  • Are any family members interested in running the business and if so, are they qualified?
  • Should a “piece of the pie” be provided to key non-family employees? If so, in what form?
  • How are the family business owners motivated to plan?

Attend this CLE webcast on business succession planning to learn the essential business, tax, employee benefits, and estate planning aspects that must be analyzed in any business succession planning.

April 12, 2014 in Conferences & CLE, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Times When Exchange-Traded Funds Are Better Than Index Funds

StockRecently, Forbes contributor, Mitch Tuchman, wrote an article about inexpensive passive funds which included index funds as well as exchange-traded funds. Here are a few reasons why you might want to consider an exchange-traded fund over an index fund.

  1. You can manage your own investment portfolio.
  2. If you need alternative asset classes, an exchange-traded fund is better than an index fund.
  3. Re-balancing portfolios or investors that trade often should consider an exchange-traded fund.

See Mitch Tuchman, Investing Basics: When ETFs Are Better Than Index Funds, Forbes,  April 11, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

April 12, 2014 in Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Friday, April 11, 2014

Why an HSA May Benefit Your Estate Plan


The recent implementation of the Affordable Care Act has left many people questioning their own health care plans.  A popular arrangement is to pair a high-deductible health plan with a Health Savings Account (HSA).  An HSA is a tax-exempt account funded with pretax dollars.  Similar to a 401(k) plan, employers and/or employees may make contributions.  Not only do HSAs save on health care, but they also provide many estate-planning benefits:

  • Unused HSA balances can supplement your retirement income or continue growing on a tax-deferred basis.
  • Contributions made to your HSA can reduce your income tax liability.

  • HSAs allow you to withdraw funds tax-free to pay for qualified medical expenses.

See E. Hans Lundsten, Joseph Marion, III, David Riedel, and Christina Scola, ABCs of HSAs: Learn How an HSA Can Benefit Your Estate Plan, JD Supra Business Advisor, Apr. 7, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

April 11, 2014 in Disability Planning - Health Care, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Thursday, April 10, 2014

Gen Y Choosing Roths


According to T. Rowe Price customer data, investors under the age of 34 have eight times as much money in Roth IRAs than traditional IRAs.  This shift is even more dramatic than an IRS analysis released last year, which showed investors ages 15-35 had four times as much money in Roth IRAs than traditional IRAs. 

This growing preference for Roths stems from the reality of younger workers’ lower paychecks, a broader cultural awareness of the strategy, and the millennials’ savings-oriented mentality based on distrust of the financial industry.

See Andrew Pavia, Big IRA Shift: Gen Y Picks Roths, OnWallStreet, Apr. 7, 2014.

April 10, 2014 in Current Affairs, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 9, 2014

Rev. Rul. 2014-9: Valid IRA Rollover Contribution Safe Harbors


In a recent Revenue Ruling, the IRS provided simplified safe harbor due diligence procedures for IRA rollovers. If qualified administrators follow the two examples of due diligence, it would give rise to the presumption that the administrators reasonably concluded that the rollover contribution was valid. 

See Rev. Rul. 2014-9Apr. 21, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this ruling to my attention.

April 9, 2014 in Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 8, 2014

IRA Tricks You May Be Missing


Here are 4 IRA “tricks” that can save you more money for retirement:

  1. Spousal contribution.  If at least one spouse is employed, you can contribute to your IRA and your spouse’s IRA.
  2. Double-up your contribution.  If you didn’t make a contribution last year, you have until April 15 to make a contribution for that year.
  3. Tax-free required distributions.  You can satisfy your required distribution by “gifting” from your IRA to a non-profit.  This allows you to avoid paying income tax.
  4. Catch-up!  If you’re 50 or older, you can contribute up to $1,000 more every year into your IRA with “catch-up” contributions.

See Rob Russell, 4 IRA Tricks You May Be Missing, Forbes, Apr. 5, 2014.

April 8, 2014 in Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Monday, April 7, 2014

The Bane of Beneficiary Designation Forms


If you haven’t updated your 401(k) beneficiary-designation form, you might not be leaving your wealth to your heirs as you wish.

This is what happened to a wealthy telemarketing executive who recently died.  He left all of his assets to his children in his will; however, much of his wealth was in his 401(k) retirement account, which went to his wife of two months.

This is a growing problem among Americans, many who think their retirement savings will be divided according to the instructions in their wills.  If a former spouse is mistakenly left as the designated beneficiary, he or she will generally be entitled to the assets.  Also, if adult children predecease you, your grandchildren will generally be out of luck.

See Jason Zweig, When Your 401(k) Has a Bad Heir Day, The Wall Street Journal, Apr. 4, 2014.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

April 7, 2014 in Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

3 Nontax Items You Need to Review


Tax time is also an effective time for an annual financial checkup.  Here are three essential nontax items retirees should be reviewing at tax time:

  1. Core Holdings.  These investments are your survival insurance, assets you never plan to sell unless it really hits the fan.  They should make up about 10% of your net worth and include precious metals, farmland, or other investments that historically hold their value against inflation.
  2. Long-term care coverage.  Whether it’s nursing home insurance, self-insurance, or something else, you need to have a way to pay for the likelihood of needing long-term care.  And if you think you will be able to rely on Medicaid as your backup plan, consult an elder-law attorney to be certain.
  3. Estate Plan.  Make your intentions clear in an up-to-date and properly executed will.  And make sure people know where to find it.  Consider a pour-over will to save your family from the headaches of probate.  And consider a Grantor Retained Annuity Trust or a Crummey trust if you’re worried about the estate tax.

See Dennis Miller, 3 Essential Nontax Items to Review at Tax Time, Market Watch, Apr. 2, 2014.

April 7, 2014 in Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Estate Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)