Pitfalls of Required Minimum Distributions

According to the Oxford English Dictionary a pitfall is a trap or a snare. Typically this trap is a pit flimsily covered or camouflaged. Another definition for pitfall is a hidden or not easily recognized danger or difficulty. Pitfall is the most appropriate word to describe the difficulty a taxpayer encounters when trying to navigate Required Minimum Distributions (RMD) and account types.

Almost everyone has heard about, or read the phrase, Required Minimum Distribution. The RMD is a requirement that taxpayers begin to take distributions from their retirement accounts. This is the government’s way of finally making you pay taxes on all those deferrals and the tax deferred growth in those accounts. The RMD is to begin no later than April 1 of the year after the taxpayer turns 70 and a half. So with that said: Are you beginning to see a pitfall?

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Smoke and Mirrors: Life Expectancy and Financial Planning

In writing a financial plan there are many factors to consider. Key factors to be considered are: inflation rate— CPI, CPI-U: rate of return on investments— historic and projected; income needs and life expectancy. Lately, I have become convinced that life expectancy is the most critical of all the variables and the one most likely to derail a financial plan.

Recently, I spoke at a major financial planning conference. The attendees of the conference were the brightest and the best in the financial planning field. My topic for the conference was how to model health care expenses for retirees in a financial plan. When I shared with the audience that our firm models all of our plans to age 100 the ‘Twitter-verse’ erupted.

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Financial Planning for Same-Sex Married Couples

Author’s note: While this article is longer than I normally post, the material is very timely and needs to be presented in its entirety. It is scheduled to be published in the September 2013 issue of The Tax Adviser. For further discussion and information, you can contact me at hello@ttillery.com.

According to the 2010 U.S. Census, there are more than 130,000 married, same-sex couples in the United States. Presently, they have the right to marry in 13 states and the District of Columbia. Up to now planning for our clients in same-sex marriages has been a “belt and suspenders” approach.

We addressed their issues with “layers” of planning: revocable living trusts, limited liability companies, management trusts, grantor retained income trusts (GRITs), IRA trusts, and the like. Though these same-sex couples did not have the same benefits as traditional married couples, we were able to come reasonably close to those benefits with appropriate planning. This column will provide practitioners with an overview of the the impact of the recent decision by the Supreme Court striking down the Defense of Marriage Act (DOMA), P.L. 104-199; a preliminary checklist of areas to be addressed with same-sex clients; and a listing of additional resources.

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Welcome to My Blog!

Welcome to my blog! For my part this project has been a labor of love for over a decade; and for those who have encouraged and supported its creation—a labor of patience! The genesis for the website is the daily emails and telephone calls I receive from advisers across a variety of disciplines: accounting, estate planning, investment and risk management, and private banking from across the country. Each one asking, “How does my solution affect the other disciplines?”

My natural curiosity and desire for knowledge encouraged me to chase the “rabbits” and find answers for other advisers. The results of the research have been codified into our Continuing education events, Platform Presentations, Live Reviews for CPA/PFS’s and CFPs®, Curricula for universities and online providers of financial planning curriculum.

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A Wise Choice

One of the questions that I often receive has to do with dividend reinvestment plans (DRIP). Recently, a lady wrote to me asking, “Now that I have the paperwork I need to complete the name change on the account from my maiden name to my revocable living trust. I have a quick question for you. With this change, I have to send my certificated stocks, which are in my maiden name to my financial advisor. I have been told that I have the option to have the certificated stocks retitled and sent back to me or to have them hold the certificates. Do you have a preference?

There is more to this question then most consumers are aware. The bottom line is to have them hold the certificates. The process to replace a stock certificate is a difficult and expensive task for an individual investor and here is why. There are three ways in which a security may be held: physical certificate, “Street Name” registration and “Direct” registration.

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