https://grreid.com/ G.R. Reid Blog G.R. Reid Associates LLP - G.R. Reid Wealth Management, LLC - G.R. Reid Health Management, LLC - G.R. Reid Insurance Services, LLC - G.R. Reid Consulting, LLC - Woodbury, New York - Great Neck, NY

A

A

A

News

Our news articles are posted on a regular basis to give our clients relevant and timely information about matters pertaining to our financial services. Browse through our current and archived articles to learn more.

2016 Holiday Gift Card Drive – Safe Center Long Island

The employees of G.R. Reid are proud to have supported the 2016 Holiday Gift Card Drive sponsored by The Safe Center Long Island. The firm is particularly proud to have supported Aaron Cohen, son of partner John Cohen, in his effort to raise funds for the center through a school project at RC Murphy Jr. High in Stony Brook, Long Island. Aaron’s efforts, with G.R.Reid’s support raised over $1,000.

safecenter
The donated gift cards, in $25 denominations, were collected and distributed to client families which enabled them to purchase holiday gifts for their children. The Safe Center LI is a creation of two former non-profit agencies that separately served the victims of domestic abuse and child abuse. Located in a historic Grumman building in Bethpage, it was created in 2014 through the merger of the Nassau County Coalition Against Domestic Violence (CADV)and the Coalition Against Child Abuse & Neglect (CCAN). Each had been providing services for victims of abuse for over 30 years. Their mission is to protect, assist and empower victims of family violence and sexual assault while challenging and changing social systems that tolerate and perpetuate abuse.  For more information and to donate to The Safe Center LI, visit their website

Posted on in category: Firm News | Tagged , , | Leave a comment

Team G.R. Reid – Making Strides Against Breast Cancer Walk

 

grrstrideswalk-1Partners, staff and family members of G.R. Reid Associates, Woodbury, teamed up on Sunday October 16 at Jones Beach State Park to participate in a Making Strides Against Breast Cancer 5 mile walk. The group met for an early morning tailgate breakfast before the 8 a.m. start amid thousands dressed in pink. Sporting team G.R. Reid T-shirts and inspired by team leader, manager Sheryl Gold, everyone crossed the finish line to raise over $3,000 to help save more lives from the pain and suffering of breast cancer.

grreid-stridesbreatcancerwalk-jonesbeach-gold

G.R. Reid team leader, manager Sheryl Gold, pictured on right wearing pink hat, with friends and family at Jones Beach on October 16 for the Making Strides Against Breast Cancer 5 mile walk.

grrstridesfinishThe event from Making Strides of Long Island, sponsored by The American Cancer Society was designed to help raise funds for groundbreaking breast cancer research, life-saving education, and critical patient services. For more information click to learn more about a Making Strides Against Breast Cancer Walk.

 

grrstrideswalk-2

 

 

Posted on in category: Firm News | Tagged , , , | Leave a comment

Financial & Wealth :: How Can I Control the Distribution of My Estate?

There are a number of ways your estate can be distributed to your heirs after your death. Each allows a different degree of control over distribution, and each poses different challenges and opportunities. If you haven’t taken steps already, it’s important to consider planning now for the distribution of your assets.

control_distribution~001

 

Intestacy

If you die without a will, it is called dying “intestate.”

In these situations, the probate court will order your debts paid and your assets distributed. Unfortunately, your assets will be distributed according to state law. Since the state doesn’t know your preferences, the probate court may not distribute your assets according to your wishes.

Because intestacy is settled in the probate court, your heirs may have to endure a long, costly, and public probate process that could take six months to a year or more. They will have to wait until the probate process is over to receive the bulk of their inheritance.

And depending on the state, probate fees could consume more than 5 percent of your gross estate.

Wills

A will is your written set of instructions on how you would like to distribute your estate upon death.

While using a will guarantees probate, it is a more desirable alternative than intestacy.

In a will, you can name a “personal representative” of your estate. This person or institution (e.g., a bank or trust company) will act as the executor and will be appointed to carry out your wishes according to your testament. You can also nominate a guardian for your minor children and their estates. Without such a nomination, the court can appoint a guardian based on other information, often depending upon who volunteers.

A will can also set forth the terms of a trust of which you have named a trustee who can manage the assets for the benefit of the beneficiaries. This is often referred to as a “testamentary” trust because it is created as part of the last will and testament and comes into being at the probate of the will.

Trusts

A trust is a legal arrangement under which one person, the trustee, manages property given by another party, the trustor, for the benefit of a third person, the beneficiary. Trusts can be very effective estate planning tools.

Trusts can be established during your life or at death. They give you maximum control over the distribution of your estate. Trust property will be distributed according to the terms of the trust, without the time, cost, and publicity of probate.

Trusts have other advantages too. You can benefit from the services of professional asset managers, and you can protect your assets in the event of your incapacity. With certain types of trusts, you may also be able to reduce estate taxes.

If you use a revocable living trust in your estate plan, you may be the trustor, trustee, and beneficiary of your own trust. This allows you to maintain complete control of your estate.

While trusts offer numerous advantages, they incur upfront costs and ongoing administrative fees. These costs reduce the value of future probate savings.The use of trusts involves a complex web of tax rules and regulations. You might consider enlisting the counsel of an experienced estate-planning professional before implementing such sophisticated strategies.

Joint Ownership

Another way to distribute your estate is through jointly held property — specifically, joint tenancy with rights of survivorship.

When you hold property this way, it will pass to the surviving co-owners automatically, “by operation of law.” Because title passes automatically, there is no need for probate.

Joint tenancy can involve any number of people, and it does not have to be between spouses. “Qualified joint tenancy,” however, can only exist between spouses. In common law states, this arrangement is generally known as “tenancy by the entirety.” Qualified joint tenancy has certain income and estate tax advantages over joint tenancy involving nonspouses.

How you hold title to your property may have substantial implications for your income and estate taxes. You should consider how you hold title to all of your property, including your real estate, investments, and savings accounts. If you’d like to know more about how the way you hold title may affect your financial situation, consult a professional.

Contracts

The fifth and final way to pass your property interests is through beneficiary designations.

If you have an employer-sponsored retirement plan, an IRA, life insurance, or an annuity contract, you probably designated a benefciary for the proceeds of the contract. The rights to the proceeds will pass automatically to the person you selected. Just like joint tenancy, this happens automatically, without the need for probate.

It is important to review your employer-sponsored retirement plan, IRA, life insurance, and other contracts to make sure your beneficiary designations reflect your current wishes. Don’t wait until it’s too late.

Many Considerations

There are a variety of considerations that will determine the distribution methods that are appropriate for you. For example, you must consider your distribution goals. By examining your situation and understanding how your assets will pass after your death, you may be able to identify the methods that will help you achieve your goals most effectively

Likewise, the larger your estate, the more you may want to consider using a trust to help guide your estate distribution. In addition, you will have to consider any special situations you may have — such as a divorce or a disabled child. All these are important considerations.


The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC.

 

 

Posted on in category: Disability Insurance, Financial & Wealth | Tagged | Leave a comment

Financial & Wealth :: What Is a 401(k) Plan?

edc_qr_apr_401k

A 401(k) plan is a self-directed, qualified retirement plan established by an employer to provide future retirement benefits for employees. Employee contributions are made on a pre-tax basis, and employer contributions are often tax deductible.

If you have a Roth 401(k) option, contributions are made with after-tax dollars, but qualified distributions after age 59½ are free of federal income tax. To qualify for a tax-free distribution, the distribution must also satisfy the five-year holding rule.

Many employers are now enrolling new hires automatically in 401(k) plans, allowing them to opt out later if they choose not to participate. This is done in the hope that more employees will participate and start saving for retirement at an earlier age.

If you elect to participate in a 401(k) plan, you can allocate a percentage of your salary to your plan every paycheck. The maximum annual contribution is $18,000 in 2015. If you will be 50 or older before the end of the tax year, you can contribute an additional $6,000. Contribution limits are indexed annually for inflation. The funds in your account will accumulate tax deferred until withdrawn, when they are taxed as ordinary income.

Employer contributions are often subject to vesting requirements. Employers can determine their own vesting schedules, making employees partially vested over time and fully vested after a specific number of years. When an employee is fully vested, he or she is entitled to all the contributions made by the employer when separating from service.

In plans that offer loans, you may also be allowed to borrow money from your account (up to 50% of the vested account value or $50,000, whichever is less) with a five-year repayment period. Of course, if you leave your job, the loan may have to be repaid immediately.

The assets in a 401(k) plan are portable. When you leave your job or retire, you can move your assets or take a taxable distribution. However, if you leave a company before you are fully vested, you will be allowed to take only the funds that you contributed yourself plus any vested funds, as well as any earnings that have accumulated on those contributions.

Within certain limits, the funds in your 401(k) plan can be rolled over directly to your new employer’s retirement plan without penalty. Alternatively, you can roll your funds directly to an individual retirement account (IRA).

Generally, you must begin taking required minimum distributions from 401(k) plans no later than April 1 of the year after you reach age 70½. Distributions from regular 401(k) plans are taxed as ordinary income and may be subject to a 10% federal income tax penalty if withdrawn before age 59½, except in special circumstances such as disability or death.

A 401(k) plan can be a great way to save for retirement, especially if your employer offers matching contributions. If you are eligible to participate in a 401(k) plan, you should take advantage of the opportunity, even if you have to start by contributing a small percentage of your salary. This type of plan can form the basis for a sound retirement funding strategy.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC.

Posted on in category: Financial & Wealth, Retirement | Tagged , , , | Leave a comment

Financial & Wealth :: What Is an IRA Rollover?

IRA_rollover~001

If you leave a job or retire, you might want to transfer the money you’ve invested in one or more employer-sponsored retirement plans to an individual retirement account (IRA). An IRA rollover is an effective way to keep your money accumulating tax deferred.

Using an IRA rollover, you transfer your retirement savings to an account at a private institution of your choice, and you choose how you will invest the funds. To preserve the tax-deferred status of retirement savings, the funds must be deposited in the IRA within 60 days of withdrawal from an employer’s plan. To avoid potential penalties and a 20% federal income tax withholding from your former employer, you should arrange for a direct, institution-to-institution transfer.

You are able to roll over assets from an employer-sponsored plan to a traditional IRA or a Roth IRA. Because there are no longer any income limits on Roth IRA conversions, everyone is eligible for a Roth IRA conversion; however, eligibility to contribute to a Roth IRA phases out at higher modified gross income levels. Keep in mind that ordinary income taxes are owed (in the year of the conversion) on all tax-deferred assets converted to a Roth IRA.

An IRA can be tailored to your particular needs and goals and can incorporate a variety of investment vehicles, as opposed to the limited number of options available in many employer-sponsored retirement plans. In addition, tax-deferred retirement savings from multiple employers can later be consolidated.

Over time, IRA rollovers may make it easier to manage your retirement savings by consolidating your holdings in one place. This can help cut down on paperwork and give you greater control over the management of your retirement assets.

Keep in mind that you may be able to leave your funds in your previous employer plan, if it is allowed by the plan. You may be able to transfer the funds from your previous employer plan to a new employer plan (if it accepts rollover funds).

Distributions from traditional IRAs are taxed as ordinary income and may be subject to a 10% federal income tax penalty if taken prior to reaching age 59½. Just as with employer-sponsored retirement plans, you must begin taking required minimum distributions from a traditional IRA each year after you turn age 70½.

Qualified distributions from a Roth IRA are free of federal income tax (under current tax laws) but may be subject to state, local, and alternative minimum taxes. To qualify for a tax-free and penalty-free withdrawal of earnings, a Roth IRA must meet the five-year holding requirement and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase ($10,000 lifetime maximum). The mandatory distribution rules that apply to traditional IRAs do not apply to original Roth IRA owners; however, Roth IRA beneficiaries must take mandatory distributions.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC.

 

Posted on in category: Financial & Wealth, Retirement | Tagged , , , | Leave a comment

Financial & Wealth :: What About Financial Aid for College?


college_financial_aid~001

What About Financial Aid for College? 

Is the financial aid game worth playing? There’s a tremendous amount of paperwork involved. The rules are obscure and often don’t seem to make sense. And it takes time.

But make no mistake, the game is definitely worth playing. Financial aid can be a valuable source of funds to help finance your child’s college education.

And you don’t necessarily have to be “poor” to qualify. In some circumstances, families with incomes of $75,000 or more can qualify.

U.S. Government Grants
The federal government provides student aid through a variety of programs. The most prominent of these are Pell Grants and Federal Supplemental Educational Opportunity Grants (FSEOGs).

Pell Grants are administered by the U.S. government. They are awarded on the basis of college costs and a financial aid eligibility index. The eligibility index takes into account factors such as family income and assets, family size, and the number of college students in the family.

By law, Pell Grants can provide up to $5,730 per student for the 2014-2015 award year.1 However, only about 28 percent of recipients currently qualify for the maximum. The average grant was $3,678 in 2013-2014.2 Students must reapply every year to receive aid.

Most colleges will not process applications for Stafford loans until needy students have applied for Pell Grants. Students with Pell Grants also receive priority consideration for FSEOGs.

Students who can demonstrate severe financial need may also receive a Federal Supplemental Educational Opportunity Grant. FSEOGs award up to $4,000 per year per student.

Article-College-Financial-Aid

 

 

 

 

 

 

 

 

 

 

State Grants

Many states offer grant programs as well. Each state’s grant program is different, but they do tend to award grants exclusively to state residents who are planning to attend an in-state school. Many give special preference to students planning to attend a state school.

College Grants
Finally, many colleges and universities offer specialized grant programs. This is particularly true of older schools with many alumni and large endowments. These grants are usually based on need or scholastic ability. Consult the college or university’s financial aid office for full details.

 

1–2) The College Board, 2014.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC.

Posted on in category: Financial & Wealth, Personal Accounting | Tagged , , , , , | Leave a comment

Financial & Wealth :: What Happens If I Withdraw Money from My Tax-Deferred Investments Before Age 59½?

Tax-Deferred Investments


What Happens If I Withdraw Money from My Tax-Deferred Investments Before Age 59½?

Withdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10% federal income tax penalty; all distributions are subject to ordinary income tax. However, there are certain situations in which you are allowed to make early withdrawals from a retirement account and avoid the tax penalty.

IRAs and employer-sponsored retirement plans have different exceptions, although the regulations are similar.

 

IRA Exceptions

• The death of the IRA owner. Upon your death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.

• Disability. Under certain conditions, you may begin to withdraw funds if you are disabled.

• Unreimbursed medical expenses. You can withdraw the amount you paid for unreimbursed medical expenses that exceed 10% of your adjusted gross income in a calendar year. Individuals older than 65 can claim expenses that surpass 7.5% of adjusted gross income through 2016.

• Medical insurance. If you lost your job or are receiving unemployment benefits, you may withdraw money to pay for health insurance.

• Part of a substantially equal periodic payment (SEPP) plan. If you receive a series of substantially equal payments over your life expectancy, or the combined life expectancies of you and your beneficiary, you may take payments over a period of five years or until you reach age 59½, whichever is longer, using one of three payment methods set by the government. Any change in the payment schedule after you begin distributions may subject you to paying the 10% tax penalty.

• Qualified higher-education expenses for you and/or your dependents.

• First home purchase, up to $10,000 (lifetime limit).

 

Employer-Sponsored Plan Exceptions

• The death of the plan owner. Upon your death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.

• Disability. Under certain conditions, you may begin to withdraw funds if you are disabled.

• Part of a SEPP program (see above). If you receive a series of substantially equal payments over your life expectancy, or the combined life expectancies of you and your beneficiary, you may take payments over a period of five years or until you reach age 59½, whichever is longer.

• Separation of service from your employer. Payments must be made annually over your life expectancy or the joint life expectancies of you and your beneficiary.

• Attainment of age 55. The payment is made to you upon separation of service from your employer and the separation occurred during or after the calendar year in which you reached the age of 55.

• Qualified Domestic Relations Order (QDRO). The payment is made to an alternate payee under a QDRO.

• Medical care. You can withdraw the amount allowable as a medical expense deduction.

• To reduce excess contributions. Withdrawals can be made if you or your employer made contributions over the allowable amount.

• To reduce excess elective deferrals. Withdrawals can be made if you elected to defer an amount over the allowable limit.

If you plan to withdraw funds from a tax-deferred account, make sure to carefully examine the rules on exemptions for early withdrawals. For more information on situations that are exempt from the early-withdrawal income tax penalty, visit the IRS website at www.irs.gov.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC.

Posted on in category: Financial & Wealth, Personal Accounting, Retirement | Tagged , | Leave a comment

What Are the Basic Types of Life Insurance?

Article-Types-of-Life-Insurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One of the best ways to protect against the financial consequences of a primary wage earner’s premature death is life insurance. However, only about 6 out of 10 Americans actually own life insurance and half believe they do not have enough.1 However, choosing from the many types of life insurance policies that are available can be a difficult process. A few main categories are described here to help you search for a life insurance policy that is appropriate for you.

Keep in mind that the cost and availability of insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving insurance, it would be prudent to make sure that you are insurable.

 

 

Term Life Insurance

Term life insurance is the most basic and usually the most affordable. Policies can be purchased for a specified period of time. If you die within the time period defined in your policy, the insurance company will pay your beneficiaries the face value of your policy.

Policies can usually be bought for one- to 30-year time spans. Annual renewable term insurance usually can be renewed every year without proof of insurability, but the premium may increase with each renewal. Term insurance is useful if you can afford only a low-cost option or you need life insurance only for a certain amount of time (such as until your children graduate from college).

 

Permanent Life Insurance

The other major category is permanent life insurance. You pay a premium for as long as you live, and a benefit will be paid to your beneficiaries upon your death. Permanent life insurance typically comes with a “cash value” savings element. There are three main types of permanent life insurance: whole, universal, and variable.

Whole life insurance.
This type of permanent life insurance has a premium that stays the same throughout the life of the policy. Although the premiums may seem higher than the risk of death in the early years, they can accumulate cash value and are invested in the company’s general investment portfolio. You may be able to borrow funds from the cash value or surrender your policy for its face value, if necessary.

Access to cash values through borrowing or partial surrenders can reduce the policy’s cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Additional out-of-pocket payments may be needed if actual dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase.

Universal life insurance.
Universal life coverage goes one step further. You have the same type of coverage and cash value as you would with whole life, but with greater flexibility. Once money has accumulated in your cash-value account, you may be able to vary the frequency, as well as the amount, of your premiums. In fact, it may be possible to structure the policy so that the invested cash value eventually covers your premium costs completely. Of course, it’s important to remember that altering your premiums may decrease the value of the death benefit.

Variable life insurance.
With variable life insurance, you receive the same death protection as with other types of permanent life insurance, but you are given control over how your cash value is invested. You have the option of investing your cash value in stocks, bonds, or money market funds. The value of your policy has the potential to grow more quickly, but there is also more risk. If your investments do not perform well, your cash value and the death benefit may decrease. However, some policies provide a guarantee that your death benefit will not fall below a certain level. The premiums for this type of insurance are fixed and you cannot change them in relation to the size of your cash-value account.

Variable universal life is another type of variable life insurance. It combines the features of variable and universal life insurance, giving you the investment options as well as the ability to adjust your premiums and death benefit.

As with most financial decisions, there are expenses associated with life insurance. Generally, life insurance policies have contract limitations, fees, and charges, which can include mortality and expense charges, account fees, underlying investment management fees, administrative fees, and charges for optional benefits. Most policies have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the policy. Any guarantees are contingent on the claims-paying ability of the issuing company. Life insurance is not guaranteed by the FDIC or any other government agency; it is not a deposit of, nor is it guaranteed or endorsed by, any bank or savings association.

Withdrawals of earnings are taxed as ordinary income and may be subject to surrender charges plus a 10% federal income tax penalty if made prior to age 59½. Withdrawals reduce contract benefits and values. For variable life insurance and variable universal life, the investment return and principal value of an investment option are not guaranteed and fluctuate with changes in market conditions; thus, the principal may be worth more or less than the original amount invested when the policy is surrendered.

Variable life and variable universal life are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses before investing. The prospectus, which contains this and other information about the variable life or variable universal life insurance policy and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

 

Source: 1) LIMRA, 2013
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC.

 

 

Posted on in category: Financial & Wealth, Life Insurance | Tagged , , | Leave a comment

Financial & Wealth :: Why Purchase Life Insurance?

purchase_life_insurance

We’ve all heard about the importance of having life insurance, but is it really necessary? Usually, the answer is “yes,” but it depends on your specific situation. If you have a family who relies on your income, then it is imperative to have life insurance protection. If you’re single and have no major assets to protect, then you may not need coverage.

In the event of your untimely death, your beneficiaries can use funds from a life insurance policy for funeral and burial expenses, probate, estate taxes, day care, and any number of everyday expenses. Funds can be used to pay for your children’s education and take care of debts or a mortgage that hasn’t been paid off. Life insurance funds can also be added to your spouse’s retirement savings.

If your dependents will not require the proceeds from a life insurance policy for these types of expenses, you may wish to name a favorite charity as the beneficiary of your policy.

Whole life insurance can also be used as a source of cash in the event that you need to access the funds during your lifetime. Many types of permanent life insurance build cash value that can be borrowed from or withdrawn at the policyowner’s request. Of course, withdrawals or loans that are not repaid will reduce the policy’s cash value and death benefit.

When considering what type of insurance to purchase
and how much you need, ask yourself what would happen
to your family without you and
what type of legacy you would like to leave behind.

When considering what type of insurance to purchase and how much you need, ask yourself what would happen to your family without you and what type of legacy you would like to leave behind. Do you want to ensure that your children’s college expenses will be taken care of in your absence? Would you like to leave a sizable donation to your favorite charity? Do you want to ensure that the funds will be sufficient to pay off the mortgage as well as achieve other goals? Life insurance may be able to help you meet these objectives and give you the peace of mind that your family will be taken care of financially.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent on the claims-paying ability of the issuing insurance company.

If you are considering the purchase of life insurance, consult a professional to explore your options.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC.

 

Posted on in category: Financial & Wealth, Personal Insurance, Retirement | Tagged , | Leave a comment

Financial & Wealth :: What Is a “Stretch” IRA?

Stretch_IRA

Finding a method to leave a lasting legacy to your loved ones without increasing their tax burdens can be difficult and complicated. A “stretch” IRA may be a useful approach that can benefit your heirs for generations to come.

A stretch IRA is not a special type of IRA but rather a term frequently used to describe this IRA strategy, also known as a “multigenerational” IRA, that can be used to extend the tax-deferred savings on inherited IRA assets for one or more generations to benefit future beneficiaries.

Here’s how it works. You let the funds accumulate in the IRA for as long as possible. You name as beneficiary someone younger, perhaps a son or daughter. When you have to start taking required minimum distributions (RMDs) from your traditional IRA after turning age 70½, you take only the minimum annual amount required by the IRS each year. (If you fail to take a minimum distribution, you could be subject to a 50% income tax penalty on the amount that should have been withdrawn.)

If you have a desire to extend your financial legacy
over future generations and don’t need the IRA assets
for income during your lifetime,
then this strategy may be appropriate for you.

When your beneficiary inherits your IRA, he or she might also have the ability to take required minimum distributions (RMDs) based on his or her life expectancy. (RMDs are calculated each year and must begin no later than December 31 of the year following your death.) In this way, your beneficiary would have the potential to stretch the distributions over his or her own lifetime, which enables the funds to continue compounding tax deferred for a longer period and avoids a large initial tax bill. Your beneficiary can also name a beneficiary, who can potentially stretch the distributions even longer.

There is a limit to how long you can “stretch” an IRA. The IRS doesn’t want to postpone taxes indefinitely. The distribution period cannot extend beyond the first-generation beneficiary’s life expectancy. For example, if you designated your son to be the sole beneficiary of your IRA and he was 40 when you died (and you hadn’t yet reached the age for taking RMDs), he could take RMDs based on his 37.6-year life expectancy, starting the year after you died. If he died 20 years later, his designated beneficiary could continue taking minimum distributions based on what would have been your son’s remaining life expectancy (20.8 years).

Of course, nonspouse beneficiaries of IRAs face some hurdles. There are different sets of rules to determine the RMDs that a nonspouse beneficiary must receive. They depend on whether the original account owner died before, on, or after reaching the required beginning date for RMDs. Not only are these rules complex, but they can have far-reaching implications. Spousal beneficiaries of IRAs have more options than nonspouse beneficiaries.

If you have a desire to extend your financial legacy over future generations and don’t need the IRA assets for income during your lifetime, then this strategy may be appropriate for you. Because many tax and distribution rules must be followed, make sure to seek legal or tax counsel before making any final decisions.

Note: Make sure the provisions in your IRA allow beneficiaries to take distributions over their lifetimes and to name second-generation beneficiaries. Distributions from traditional IRAs are taxed as ordinary income. Distributions prior to age 59½ are subject to a 10% federal income tax penalty (this rule does not apply to IRA beneficiaries, who must begin taking minimum distributions no later than December 31 of the year following the original owner’s death). Beneficiaries also have the flexibility to take out more than the minimum distribution at any time.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC.

Posted on in category: Financial & Wealth, Retirement | Tagged , , , , | Leave a comment