Redkey Gordon P.C.

When the Age Difference is Measured in Two Digits, Special Steps in IRA Distributions

Ten year plus differences require use of different information to calculate Required Minimum Distributions from your IRA

If your spouse is ten or more years younger than you are, calculating the Required Minimum Distributions from your IRA is different than if you were closer in age.

Kiplinger's article "Retirement Distributions When Your Spouse Is Much Younger," explains that most people use Life-Expectancy Table III, the Uniform Lifetime Table, in Appendix B of IRS Publication 590 to calculate their required minimum distributions ("RMD"). However, if your sole beneficiary is a spouse who is more than 10 years younger than you, then you should use Life-Expectancy Table II, the Joint Life and Last Survivor Expectancy, to determine your RMD. That table requires you to withdraw less money each year than you would if your spouse were older.

Here's an illustration: if you're 70½ in 2015 and need to take your first RMD, you would divide your account balance as of the end of 2014 by 27.4. So if you had $100,000 in your account, you'd need to withdraw $3,649.64. But if your sole beneficiary is your wife, age 53, you'd divide your account balance by 32.6 and would need to withdraw only $3,067.48.

In Life-Expectancy Table II, look for your age on the left side of the table, then find where that line intersects your spouse's age on the top. Some RMD calculators will let you input your spouse's birthdate to determine your RMD, even if you need to use the different life-expectancy table.

You should also make sure your IRA administrator knows your spouse's birthdate, so they will use the correct table when calculating your RMDs—particularly if you have automatic RMD withdrawals.

At the same time that you are taking care of these tasks, check your beneficiary designations to make sure that they reflect your current life. The beneficiary designations on your retirement accounts and life insurance policies will guide their distribution, regardless of what your will says. Even if you have updated your will, you could still give your ex-spouse your IRA or the proceeds from your insurance policies. This happens more often than you'd think!

Reference: Kiplinger (December 16, 2015) "Retirement Distributions When Your Spouse Is Much Younger"

So Much to Shred, So Little Time!

We continue to drown in bank statements, printed out email receipts and more paper than we need. Some documents must be saved, but many can be tossed. Shred them to avoid identity theft problems.

Keeping your finances in order is not that complicated, according to the national newspaper USA Today in "Drowning in bank statements, etc.? Here's what you can toss." There are three overarching tasks: pay bills on time, file taxes and save more. Getting organized is the best way to start, and what better way to start the New Year than a clean sweep of paperwork? Most of the documents you receive from banks, credit card companies and utility companies do not need to be kept, unless you anticipate having a problem.

For instance, bank accounts and bill balances can go. There's no real reason to keep those. These update you on balances at a moment in time but don't mean much in the future. Most of these don't need to be kept for more than a year or two, and typically electronic records will work just as well. However, tax-related financial documents are a different story. In the event of an audit, you'll need all the forms from that tax year to prove your return was accurate. The IRS says you should keep all your tax documents for at least three years. This includes your W-2s with your income for the tax year and your Form 1098 mortgage interest statement. If you have a claim for a loss from worthless securities or bad debt deduction, the IRS recommends you keep tax documents for up to seven years. After seven years, the only reason to hang onto tax documents is if you haven't filed a return at all or if you filed a fraudulent return, according to IRS record-keeping guidelines. If so, you've got bigger issues.

In this instance, the old adage "Better Safe than Sorry" may create more problems than shredding documents. There's the risk of identity theft or fraud if sensitive data falls into the wrong hands. Also, with all that clutter, your important documents may never find the right hands when they're actually needed.

Another category of documents is important and difficult to replace: property deeds, passports, and powers of attorney. They should be kept in a safety deposit box at your bank or in a fire-proof safe. Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney will be able to provide you with guidelines for safekeeping estate-related documents, including those that you may need in the event that you or your spouse passes away.

WHAT TO KEEP: Tax paperwork, estate-planning documents and pension plan documents.

WHAT TO SHRED. These are typically available online. Go ahead and trash bank account statements, credit card bills, quarterly investment statements, and utility, cable, and phone bills.

You may want to let trusted family members know where important documents are and how to access them. Consider this another part of the on-going conversation about your wishes to have with your heirs.

Reference: USA Today (December 21, 2015) "Drowning in bank statements, etc.? Here's what you can toss"

Better than Nursing a Hangover: Start Fresh on New Year's Day

A number of recent changes to some of the critical moving parts of estate planning make updating your estate plan in the first quarter of the New Year a good idea. Another good idea: make a "to-do" list on New Year's Day.

Think of New Year's Day as an annual reminder to update your estate plan – even if all you do is make a list of the things you mean to do in 2016. A recent article in The Business Investor's Daily, "5 Changes to Make to Your Financial Plan Now," provides a framework to get things rolling.

Make gifts to family. Plan to give gifts of cash or tangible property of up to $14,000 per person because there's no limit on how many gifts you can make, and there is no gift or estate tax. Couples can combine their gift giving to $28,000 per person. This is an easy way to reduce a potentially taxable estate. Establish a long-term strategy and give annual gifts to your beneficiaries.

Give to charity. You can also make a donation to a charity, and if you tend to make significant charitable donations, consider establishing a family foundation. To avoid capital gains tax, you should consider donating appreciated assets like stocks. A donor-advised fund is another way to receive a charitable deduction today, avoid capital gains tax and retain the authority to determine its future use.

Check your beneficiaries. This applies not just to your personal estate plan but also to the benefits you have from your employment, like life insurance and retirement assets.

Set up a meeting to address your health care proxies, powers of attorney, and an updated will. Now's the time to schedule a meeting with your estate planning attorney to create or update these documents.

Apply for Social Security and set up life insurance. If you are or will be 62 before the end of 2015, apply for your Social Security benefits. The latest federal budget bill took direct aim at and eliminated a Social Security claiming strategy, so this is a "sooner rather than later" task. And don't forget to update or buy life insurance.

Reference: Business Investor's Daily (December 18, 2015) "5 Changes to Make to Your Financial Plan Now"

The Sandwich Generation Needs an Extra Set of Hands

Caregivers who are busy with children, aging parents and careers often drop one ball when juggling their responsibilities. The ball that is dropped? Taking care of themselves.

If you've ever tried to learn to juggle, according to "The Sandwich Generation Juggling Act," from the website Next Avenue, you know that you start with one ball, add a second, and when you are ready, add a third. Most people with reasonable hand-eye coordination can master three balls, but when they get to the fourth ball, things start to fall to pieces.

Today, we have a societal juggling act going on within the Sandwich Generation of caregivers—the group defined as the 24 million Americans who are juggling children, careers, and caring for an older parent. While many individuals can handle three balls (me, children, career), once the caregiving ball is added, the ball that gets dropped is "me," or the caregiver themselves.

Caregivers should take each ball of responsibility they're juggling and focus on ways to keep that ball moving in a fluid motion. Juggling really only requires getting one ball into the air at a time, so let's look at each one.

Ball 1: Children. Children can become an essential ingredient in the care of an older grandparent. Most children, even as young as four or six, are tech-savvy unlike any generation before them. Asking a grandchild to connect with his or her grandparent via computer benefits both young and old when visiting in person isn't convenient. In addition, this online visit allows caregivers a needed break, maybe even a quick afternoon nap, which can aid by providing recuperative sleep time, increased alertness, and an improved mood.

Ball 2: Career. Many working caregivers don't know that their employer may have elder care or caregiving services that can help them juggle work and caring for an aging parent. In addition, many working caregivers forget that the Family and Medical Leave Act (FMLA) was created with this type of caregiving situation in mind. Almost all U.S. employers offer some unpaid leave to full-time employees. FMLA allows for eligible employees to receive 12 weeks of unpaid leave (26 weeks if caring for a covered service member or veteran). While FMLA provides job-protected leave, it doesn't require leave for the caregiving of a grandparent, in-law or sibling, leaving that to each state to define.

Ball 3: Caring for an Aging or Ailing Parent. The most critical caregiving decisions deal with senior living options or in-home care and financial aspects, which include long-term care plan benefits, legal documents, medical billing, and insurance coverage. If you have issues with insurance claims and medical billing, speak with an elder law attorney or estate planning attorney experienced with elder care and senior issues.

Ball 4: Me. According to a recent study, stress is a caregiver's Number One Enemy. Stress relief is vital and can be found in caregiver support groups. There are also online communities where caregivers create private groups inviting family and friends to assist with tasks while the caregiver attends to other activities or gets a little respite.

Making a commitment to making time for self-care is the healthiest way to maintain the stamina and mental and spiritual well-being necessary to juggle the other three balls. Self-care is not selfish, nor should it be treated as a luxury. Even if you can only carve out five minutes a day to sit still and breathe deeply, that short period of time is the most important ball to protect from hitting the floor.

Reference: Next Avenue (December 16, 2015) "The Sandwich Generation Juggling Act"

Your Heirs Will Appreciate Your Having Proper Estate Planning in Place

Financial planners are often asked about basic estate planning documents, and they understand how important these documents are for you and your heirs.

Financial planners who help families build and manage assets are often asked what documents are needed in an estate plan. The following documents create a foundation of an estate plan: an up-to-date will, a durable power of attorney for health care (sometimes called a health care proxy), and an advance health care directive (also known as a living will).

Property transfer clarity. We hear about the disastrous fallouts when celebrities die without wills or other crucial documents in place. Elvis Presley is a famous example, but there are countless others, including James Gandolfini, Whitney Houston and Phillip Seymour Hoffman in the past few years. Who needs that kind of drama?

If you have a valid will, the transfer of assets is much less confusing and difficult. A will tells your executor or personal representative how your assets should be distributed. A will can also state the order in which your heirs should receive these assets—in case funds run out before all of the bequests are fulfilled.

When property is owned jointly with two names on the title, it passes automatically to the surviving owner. Other financial assets, like life insurance proceeds and funds from retirement plans, are likewise automatically transferred to the named beneficiaries. Make certain these are up-to-date. If neither of these applies and there is no will to present to the judge, he or she will finalize the transfer of property in probate according to state law.

In case of incapacity. Remember Terri Schiavo, the young Florida woman? Months after she'd suffered severe brain damage, she remained in a persistent vegetative state. Her husband wanted to remove the feeding tube keeping her alive, claiming she wouldn't have wanted to be on artificial life support, but her parents were against this. Terri didn't have any estate-planning documents to indicate her wishes, and as a result, this saga lasted almost a decade with the courts, Congress, and even President George W. Bush becoming involved.

In the event you become incapacitated, there are two legal documents that can help express your wishes. One is a living will or an advance health care directive. This details how you want to be treated at the end of life, so that your appointed agent can make decisions in accordance with your wishes. The second is a durable power of attorney for health care. In this document, you name the person who'll make those decisions on your behalf.

Where to get estate documents. You can get estate-planning documents from an estate planning attorney, lawyers who focus their practices on estate planning. These attorneys can help you transfer property to your heirs in the most tax-efficient way possible and make sure your plans adhere to the state estate laws where you live.

Although you can search the Internet for services that provide templates for wills, powers of attorney, and health care directives, you are infinitely safer to have an experienced estate and trust attorney who understands your family's specific circumstances prepare these documents. There are more disastrous cases that result from do-it-yourself legal documentation than from those that are handled by an experienced estate planning attorney.

Talk to Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney to draft these documents to meet your family's needs and ensure that when you have passed away, your property will be distributed according to your wishes. Doing this now will be greatly appreciated by your family.

Reference: NASDAQ (December 16, 2015) "Why You Need Key Estate-Planning Documents"