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New Year, New Financial Goals

If history is a guide, this coming week nearly half of us will make resolutions seeking to improve some facet of our lives, many of which will be focused on personal finance. If one of your goals for the New Year is to get your financial life in order, here are a few key areas which should be included on your 2015 financial planning checklist.

 

As you begin compiling your 2015 financial goals, one of the first items on your list should be to calculate how much money you'll need in retirement. It’s one of the most significant math problems you’ll do after you finish grade school. Once you have arrived at the answer to this math problem, you need to examine if that answer will create a problem for you as you prepare for retirement.

 

With that target in place, pay heed to the advice in an article from Seacoastonline.com titled “Start your 2015 financial planning checklist.” Consequently, you should create a strategy that will help you achieve that goal. A savings plan is one method you can use—and take maximum advantage of any tax-deferred savings opportunities available to you along the way.

 

For instance, if your company has a 401(k) plan—especially where they match your contributions—it’s imperative that you defer as much of your pay as possible to this account to enhance your retirement security. That’s free money that your employer is setting aside for you just for being smart and planning for retirement!

 

In 2015, the 401(k) contribution limit is at $18,000. If you are age 50 and older, you can enjoy an additional $6,000 catch-up contribution.

 

If your employer doesn’t have a 401(k) program, then you should start and contribute to a traditional IRA. You can put in $5,500 pre-tax ($6,500 for those age 50 and older). In addition, you can contribute to a Roth IRA, which, for 2015, has the same limits.

 

Eligibility to make Roth contributions, however, starts to phase out as your modified adjusted gross income exceeds $183,000 for married couples and $116,000 for single tax filers. The article suggests that, to maximize growth potential, it's typical to make traditional and Roth IRA contributions early in the year, instead of waiting until the contribution deadline (April 15^th of the next year).

 

Take a look at your insurance coverage and make sure that your financial plan is not derailed by an unforeseen disability or untimely death. Acquire adequate long-term disability insurance so you will have income to pay expenses and to fund other goals. Although many employers offer group disability and life insurance coverage at a low cost, that coverage may not be sufficient. Supplement this with individual coverage to provide adequate security for you and your family.

 

Last, but certainly not least, your 2015 checklist should include setting up and maintaining a complete, up-to-date, estate plan with an experienced estate planning attorney.  As one of the most neglected areas of personal finance, you should have, at a minimum: (i) a will to designate beneficiaries for your assets (ii) a durable power of attorney to designate an agent to act on your behalf in financial dealings; and (iii) a health care proxy to designate an individual to act for you when health care decisions are required. You should also discuss a living will with your attorney so that you can make your wishes known for life-prolonging treatments you want or don’t want.

 

In addition, trusts can play an important part in an estate plan. A revocable trust can simplify estate settlement for family members: it isn’t part of the probate process and provides for ongoing management of your financial resources in the event you become incapacitated.

 Contact Robert A. Gordon, an experience estate planning attorney, of Redkey Gordon Law Corp for more information.

Reference: Seacoastonline.com (December 28, 2014) “Start your 2015 financial planning checklist”

Lack of Health Insurance Could Impact Your Taxes in 2014

The Journal has consulted several local professionals with expertise in various financially related realms. We asked each for tips readers can take with them into 2015.

 

As we enter 2015, many Americans will start to shift gears to tax season and filing their 2014 tax returns. Just make sure you are aware of potential penalties, particularly regarding health insurance.

 

Starting in 2014, all nonexempt U.S. citizens and legal permanent residents must maintain minimum essential health-insurance coverage. This requirement is discussed in a recent Albuquerque Journal article titled “Tips help prep for improved finances.”

 

This requirement was part of the Patient Protection and Affordable Care Act, known commonly as “Obama Care.” If you don’t maintain the minimum essential health-insurance coverage it can mean a penalty by way of additional taxes. This penalty tax will start to be charged on 2014 individual income tax returns—those that are due before April 15, 2015. The IRS will assess the penalty based on the taxpayer’s income level.

 

According to the federal government’s website, healthcare.gov, individuals without health insurance coverage in 2014 will pay the higher of these two figures when filing their tax returns:

 

• One percent of their yearly household income. This will be calculated based on the amount above the tax-filing threshold, which is approximately $10,000 for an individual, but not in excess of the national average premium for a bronze-level health-insurance plan; or
• $95 per person and $47.50 for children under 18, not to exceed $285 per family.

 

These penalties are set to increase for individuals and families who are not covered in 2015.

 To find out more contact your local Sacramento attorneys at Redkey Gordon Law Corp.

Reference: Albuquerque Journal (December 28, 2014) “Tips help prep for improved finances”

Keeping a Vacation Home in the Family

Make a detailed plan for the home's future to avoid family feuds down the road.

Many memories are made in family vacation homes, and a lot of families do not want those traditions to end when a loved one passes. However, experts say you need to be careful in planning so the home's future isn’t the source of feuding. The biggest mistake owners can make is to fail to make a detailed plan for the home's future, cautions a recent Kiplinger's Retirement Report article titled "How to Pass Down a Vacation Home."

 If an owner says “I don't care, I won't be here,” it rarely leads to a happy result. As we always say, besides honesty, communication is the best policy. Owners should meet with their adult children and spouses to create a plan for either keeping the vacation house in the family or selling it. Families can also get help from an experienced estate planning lawyer to develop ideas and plans.

 If you decide to keep the house, draft a written plan to detail how to pay for expenses like repairs, insurance, and real estate taxes. Also, family members should develop ways to reduce tensions over the time they spend on maintenance. Some have a rotation for maintenance work so there's a sense of fairness. Hiring a cleaning service or property manager can also reduce hard feelings.

 Deciding how to transfer the property to future generations is critical. Again, you should check with an estate planning lawyer to figure out the gift and estate tax implications.

 Working through these types of issues in the open with everyone involved will help the family enjoy the vacation home to its fullest without all the worries of the future.

 Contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning lawyer to develop ideas and plans.

Reference: Kiplinger's Retirement Report (December 2014) "How to Pass Down a Vacation Home"

Late Film Director's Estate Kept Private, Likely Due to a Trust

In all likelihood, [film director] Nichols had a "revocable living trust," that contained the dispositive provisions of his estate so that his wishes were shielded from the public. 

 

Celebrities and high-profile estates tend to be a hot topic in the media, but sometimes the media doesn't get the full story.

 

An article from The National Review, titled "The Death of Mike Nichols and Estate Planning," sheds some light on why we know so little about the estate of award winning director Mike Nichols.

 

It seems the "[d]etails of the distribution ...are concealed in a private trust that has not been made public."

 

Experts say that, in all likelihood, Nichols had a "revocable living trust" containing the dispositive provisions of his estate. Consequently, with such a trust his wishes were shielded from the public and not part of a court record, which is public.

 

All we can do is speculate. We can’t tell, except for the tangible personal property, if the famous director split his assets between his wife and children—or left them all to his wife, or all to his children, or all to charity, and so on. Those details are in his revocable living trust. He may have also gifted his assets during his life—or he may have passed them by beneficiary designation or title.

 

So, don’t believe everything you read. Remember, just because it’s in print doesn’t mean it’s true, and things aren’t always as they seem. From an estate perspective, the moral of the story according to Forbes is to use a revocable living trust to avoid probate and to provide many advantages over just a will, not just the privacy advantage that Nichols achieved.

 

Contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney, to help determine whether a revocable living trust is appropriate for you.

 

Reference: The National Review (December 9, 2014) "The Death of Mike Nichols and Estate Planning"

Estate Planning without the Stress

Wouldn’t knowing someone will step in if you become incapacitated create a little peace of mind? Wouldn’t knowing that your family is taken care of create even more peace of mind? Wouldn’t knowing there is a plan in place – a plan you developed – if something happens to you take a significant weight off your shoulders?

 

Estate planning can do a lot of things for you, but one of the most valuable takeaways is peace of mind.

 

A recent Forbes article, titled “11 Fundamental Elements of a Stress-Free Estate Plan,” provides practical advice on how to design a plan that protects your assets and provides for loved ones. While everyone’s individual needs are a bit different, there are some basic components you need to examine along with deciding who gets what.

 

Here are some key points to consider from the original article:

 

• Determine who you want managing your affairs if you become disabled, incapacitated, or pass away;
• Plan in the event you have to live in a nursing home or receive significant long-term healthcare, as well as the effect of Medicaid on your financial needs;
• Protect the assets inherited by your heirs from litigation and divorce;
• Provide for the care of children and grandchildren who may be too young or inexperienced to effectively manage money;
• Provide for children or grandchildren with special needs or in special circumstances;
• Prevent challenges to your estate plan; and
• Plan a family estate plan for blended families that ensures everyone is provided for according to your wishes.

 

Start your planning now. Read more about these basics to be covered today … because estate plans are as much about today as they are about the future.

 

Be sure to contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney.

 

Reference: Forbes (December 9, 2014) “11 Fundamental Elements of a Stress-Free Estate Plan”

Holidays on a Retiree Budget

The secret, experts say, is to find a balance between keeping some comforting traditions and letting go of ones that obviously no longer fit.

 

How do you manage the holidays on a retiree budget? If you are a retiree or will be retiring in the coming year or years, then this article may be for you.

 

Experts say that the key is to find a balance between keeping some of the traditions and saying goodbye to those that no longer fit.

 

The first holiday after retirement can be a “golden opportunity” to set new expectations, accordingly to a recent article in the Chicago Tribune titled “Tips for recent retirees to stretch holiday budget.”

 

With new-found additional free time, retirees can offer dinners out or home-cooked meals, rather than spending money on expensive toys for the grown children. They can also write letters to their grandchildren filled with family stories or set spending limits on gifts that focus on creativity rather than on price.

 

Don't force sudden change all at once. If—and only if—you can afford to do so. The original article notes that keeping holiday budgets the same in that first year of retirement can be comforting when you've been hit with a lot of other dramatic changes.

 

However, what must change, is the conversation. With the family gathered, you can begin the discussion about your retirement in general, not just during the holidays. It's a chance to say, “We're retired now, and there are some changes we want to tell you about.” Also, it's the perfect time to talk about estate planning and to tell your kids that you have a solid retirement plan, and that they need not worry.

 

It’s a nice idea to also set up some new expectations. The original article also advises speaking with, or perhaps coordinating with, the other set of grandparents on the presents for children and grandchildren. No sense creating a sort of unnecessary “gift-giving arms race.”

 

Getting a plan together for your retirement is always a good idea and worthwhile. Talk with your local Sacramento County estate planning attorney Robert A. Gordon of Redkey Gordon Law Corp to help coordinate a sound strategy with your financial advisor.

 

Reference: Chicago Tribune (December 8, 2014) “Tips for recent retirees to stretch holiday budget”

Retirement Planning Changes in 2015: What You Need to Know

There were five changes that occurred in 2014 that everyone planning for retirement needs to know about.

 

The phrase "roll with the changes" may be 2014's retirement planning motto. While we could review political, economic and international, those affecting IRA planning have been especially interesting for retirees and the estate planning attorneys who advise them. Not surprisingly, Forbes has weighed in with an article chock full of advice titled “5 Biggest Retirement Planning Changes for 2015”.

 

A Change in Creditor Protection for Inherited IRAs. Overall, qualified retirement accounts, such as 401(k)s, pensions, and IRAs, have good creditor protections. However, in 2014 the Supreme Court cut back on some protection for IRAs. Typically, up to $1.25 million are protected from creditors if it’s in a Roth or Traditional IRA under federal bankruptcy laws. But the U.S. Supreme Court, in Clark v. Rameker, held that inherited IRAs are not “retirement funds.” So these don’t get creditor protections afforded under federal law. This might change how you want to bequest assets to your heirs. You should speak with a qualified estate planning attorney if you have questions.

 

Qualified Longevity Annuities to 401(k)s. Annuities have long been an important part of ERISA qualified retirement plans. The primary form of payment for married participants in a defined benefit plan is a qualified and joint survivor annuity. However, longevity annuities—which can be used to pay for long-term care expenses and protect against outliving your assets—haven’t had a big part in qualified plans even though there’s a natural fit with retirement planning. The United States Treasury changed its rules in 2014, and now longevity annuities can be used in 401(k)s and IRA markets. Individuals are now allowed to hold a qualified longevity annuity contract, or “QLAC” within an IRA or 401(k) that’s worth up to the lesser of 25% of their account balance or $125,000. Under the new Treasury rules, QLACs are excluded from the retirement account balance when calculating required minimum distributions, which gives people looking at retirement one more way to create a solid income plan for when they stop working.

 

IRA to IRA Rollovers. Individuals can receive an IRA distribution and roll those funds over to another IRA, or the same IRA, within 60 days to avoid tax issues. The old position of the IRS was that this rule applied to each IRA. As a result, if you had five IRAs, you could take a distribution from each of the five IRAs and roll it over to the same or another IRA within 60 days without any issues. However, the law said that a rollover from an account was allowed only once in a 12-month period. After the Tax Court decision in Babrow v. Commissioner, the 12-month rollover limitation now applies to all IRAs.  This mean that only one 60-day rollover is allowed in any 12-month period, regardless of the number of IRAs an individual owns.

 

Increased Access to Annuities in Target Date Funds. Another way to give qualified defined contribution plan participants more access to a guaranteed income source, Treasury granted expanded access to annuities inside of 401(k) plans. The new rules allow 401(k)s to offer target date funds that have deferred income annuities as the default investment option. The target date fund can have annuities that start payments at retirement or later, giving people another way to produce guaranteed retirement income and protect themselves from going broke later in retirement.

 

Read more about these changes and talk to your local Amador County estate planning attorney, Robert A. Gordon of Redkey Gordon Law Corp about how they may affect and benefit you and your estate.

 

Reference: Forbes (December 8, 2014) “5 Biggest Retirement Planning Changes for 2015”