Say goodbye to the stretch IRA! That's the message from Congress, where a pending bill with bipartisan support would deep-six this tax-advantaged practice. Stretch IRAs have been a boon to non-spouse beneficiaries who inherit a retirement account because they can extend the period of tax-free growth on an inherited IRA over their expected lifetime.
A sweeping new law changing retirement investing tax rules was passed by the House of Representatives on May 29th. It's expected to be passed by the Senate and has the support of President Donald J. Trump. Although the legislation may not be signed into law until late this year, individuals with retirement accounts should consider how its enactment will affect them and their beneficiaries. Here's what you need to know now:
The amount of coverage in the media of the U.S. - China trade war is far out of proportion with the potential impact that China - U.S. trade has on the U.S. economy.
It may be better to give than to receive, as the old saying goes, but it's also best to avoid the taxes on your generosity. What's also smart is knowing when you have to file a tax form as a gift giver.
To keep your tax bill down, if you are over 70½, consider a qualified charitable contribution, which makes donations of up to $100,000 from an Individual Retirement Account (IRA) to a fully deductible charity.
Despite the way securities traditionally are sold and what you hear in the media, the stock market confoundingly defies prediction. Look at the two quarters ended March 30th, 2019: The 19.8% plunge in the Standard & Poor's 500 index in the fourth quarter of 2018 was a flash bear market; in the first quarter of 2019, a recovery was just as swift, a snapback gain of 13% gain. If whipsaw emotional shifts from fear to greed make it harder to stay realistic about what to expect from a prudently-designed retirement portfolio, this chart offers a way to know what to expect based on historical data.
A tax-savvy way to improve your real estate situation is to swap one property for a new one. Called a 1031 exchange, referring to its section of the tax code, this works so long as you are switching business properties. Personal residences aren't eligible.
"Everybody wants to go to heaven," according to a classic blues song, "but nobody wants to die." Nor does anyone like to think about dying. And that must be why some people don't put much thought into estate planning, much the less in drawing a schematic for distributing one's earthly possessions to those you love the most.
So, you want to sell your small business? The good folks in Washington have a dandy tax break exempting you from all federal taxes on the sale-provided that you own a C corporation.
An installment sale of real estate is a variety of seller financing in which the buyer is borrowing from the seller. Why would a seller want to do this? Isn't it better to get the money up front? No, not always, especially when a sizable real estate capital gain would push you into a higher tax bracket.
- Read More
Foreign Intrigue In Estate Planning
Are you married to someone who isn't a U.S. citizen? If you are, special estate planning considerations may come into play.
Whether your spouse is a citizen or not, you can use the same basic estate planning documents without any reservations. You can create a will bequeathing assets to your spouse, name him or her as a beneficiary of retirement accounts, and designate your spouse as the agent under a power of attorney. No problems there.
But things get trickier when your spouse inherits assets. Normally, property transferred from one spouse to another, during your lifetimes or when one of you dies, is completely exempt from gift or estate tax thanks to an unlimited marital deduction. But that doesn't apply to non-citizen spouses.
Instead, you can make use of a $5.49 million unified gift and estate tax exemption that covers transfers to any beneficiaries, including a non-citizen spouse.
In addition, you can give a non-citizen spouse as much as $149,000 (in 2017; the amount is indexed for inflation) in gifts during your lifetimes.
Other ways to avoid being subject to the rules for non-citizen spouses may include:
1. Have your spouse become a U.S. citizen. This can be an obvious solution. It allows your spouse to qualify for the unlimited marital deduction by the time your federal estate tax return is due. That's generally nine months after death, but the IRS may grant a six-month extension.
Because it takes time to obtain citizenship—there is a waiting period before you can even apply—it's important to start sooner than later.
2. Rely on a QDOT trust. With a qualified domestic trust (QDOT), you can leave property to the trust, rather than directly to your spouse. Then your spouse can receive income from the QDOT that is exempt from estate tax.
But there are a couple of extra wrinkles. If your non-citizen spouse withdraws principal from the QDOT, it will be taxed like a distribution from your taxable estate, which can increase estate tax liability. There are also limitations on investments made by QDOTs. In some cases, it could make sense to complement a QDOT with other kinds of transfers to your spouse. Finally, a QDOT can be structured to end if your spouse becomes a U.S. citizen.
© 2019. All Rights Reserved.