Archives for May 2014

Pennies from Heaven & Inherited IRAs

Recently an adviser sent me the following email. The email had an attachment that indicated that a named beneficiary was to receive a taxable distribution as a result of the death of an IRA owner. The amount was small – relatively speaking – $38,000. The adviser’s question was:

“Tom, it looks like this company is going to give this guy a 1099-R on the death benefit.  Can that be avoided if he transfers the funds to another institution as an inherited IRA (option C) before year end?”

And the short answer, which I studiously avoid, is “Yes.” However, there is much more going on in the facts and circumstances which I do want to visit. The beneficiary has a singular opportunity which is now being offered to him, the waiver of the 10% early withdrawal penalty. A distribution made to a designated beneficiary of an IRA, after the death of the IRA owner, is not subject to the 10% premature withdrawal penalty, regardless of the age of your beneficiary: in this instance, a savings of $3,800. [Read more…]

Been to any good “events” lately?

Oh my, there must be something in the water – nationwide, or perhaps just the Piedmont region. Recently while visiting our offices in Washington, DC and Raleigh, NC, I had the opportunity to opine on Event Liability Insurance (ELI) with several of our clients. In each case the fact patterns were very similar.

One client had invested heavily in income producing real estate. There were a variety of properties in different locations; all geographically diversified (diversification is an excellent risk management technique). Additionally, limited liability companies (LLCs) were created for each of the properties, and there was even a master LLC as a member for each of the LLCs holding the real estate. Finally, each of the properties had General Liability Insurance coverage as did the Master LLC, and the client’s trust was named as an additional insured. Our office had done a very good job on managing the risk associated with income producing real estate. [Read more…]

Making a difference

This past week I was visiting Ashley Thiem, CPA / PFS in our new Paraklete® Financial, Inc. office in Charleston, SC. As we were making the rounds, I continued to be amazed by the number of individuals, and advisers, who want to retain the services of our firm. There is a definite desire on the part of consumers to engage a financial planning firm that does not manage assets or sell products.

One of the venues we visited was a large manufacturing operation. The business had been in the family for several generations and the next generation was about to “step up to the plate.” Their concerns were business continuity planning, income tax savings and better cash flow for the company—not that there wasn’t enough cash flow; but rather there was too much, which resulted in higher income taxes. [Read more…]

Boot Camp

Well it’s that time of year again. Presently at the firm we are transitioning from the Income Tax Review season into the CPA / PFS Live Review season. This tax season was particularly difficult for our clients and their advisers. The reality of the reinstatement of the Personal Exemption Phaseout and the limitation on Itemized Deductions became quite apparent to many of our clients. Also, the Net Investment Income tax, created to support the Affordable Care Act, gave shocking results to our clients, to say the least! Long story short, taxes are higher for almost everyone. [Read more…]