What a year it has been!
We all know that it’s been a crazy year navigating a global pandemic and keeping our family safe, but it’s also been an extraordinary year when it comes to estate tax, estate planning and changes in the law.
We ended 2019 and began 2020 with a major law change, called the Secure Act. With this change, the government (who indicated there were many benefits to the act) essentially enacted a tremendous increase in our income taxes by no longer allowing an IRA received by a beneficiary after death to be stretched out over the lifetime of that beneficiary. Under the old law, the required minimum distributions were calculated based on the age of the beneficiary, and therefore permitted to be stretched out, allowing income tax deferral for decades. The Secure Act, however, has done away with that income tax deferral benefit, and now requires the inherited IRA to be distributed no later than 10 years following the date of death. This results in the need for significant income tax planning for beneficiaries to potentially lower the overall income tax paid on an inherited IRA. As a result of the law, we encourage you to consult with us, or your tax accountant, to consider Roth IRA conversions as a way to potentially reduce the income tax ramifications for your beneficiaries.
In addition to starting the year with law changes, COVID-19 made it even more essential that we do everything in our power to avoid probate so that our loved ones can act on our behalf immediately upon incapacity or death. During the first part of the year, most courts, including probate courts, were closed or had reduced services. Seeking even the simplest orders from the court became difficult and unpredictable. Although the courts worked as hard as they could under the circumstances, if any actions or approvals were needed following the death of a loved one, it presented challenges to get “a third party’s approval” to act. The only way to avoid probate is to make sure that you do not die with probate assets. Probate assets are assets that you own alone, not controlled by a contract. As we continue to tell our clients, trusts do not avoid probate; however, assets that are retitled and aligned with a trust will not have to go through probate.
For our clients: if you have not yet called for your annual review, please contact our office to ensure that we review your current asset values, current asset ownership, or any changes in your assets. We will confirm that your assets are aligned with your estate plan, and see that we have verification from the institutions recording this. Again, this is part of our ongoing care program, and we want to make sure you and your family take advantage of it.
To learn more about how we can help you make a plan to care for your loves ones, that will change with the craziness of our changing world and your changing life, visit our website, explore our blog, and schedule your complimentary consultation today!