Salines-Mondello Law Firm, PC

How Will the New SECURE Act Impact My IRAs and 401(k)?

“A new law could affect the IRAs and 401(k)s of millions of Americans in 2020.”

The SECURE Act is the most substantial change to our retirement savings system in over a decade, says Covering Katy (TX) News’ recent article entitled “Laws Change for IRA and 401K Retirement Savings Plans.” The new law, called the Setting Every Community Up for Retirement Enhancement (SECURE) Act, includes several important changes. Let’s take a look at them.

There is a higher age for RMDs. The current law says that you must start taking withdrawals or required minimum distributions from your traditional IRA and 401(k) or similar employer-sponsored plan when you turn 70½. The new law delays this to age 72, so you can hold on to your retirement savings a while longer.

No age limit for contributions to traditional IRAs. Before the new law, you could only contribute to your traditional IRA until you were 70½. However, now you can now fund your traditional IRA for as long as you have taxable earned income.

Stretch IRA Limitations. Previously, beneficiaries could stretch taxable RMDs from a retirement account over his or her lifetime. Under the SECURE Act, spouse beneficiaries can still take advantage of this "stretch" distribution, but most non-spouse beneficiaries will have to take all the RMDs by the end of the 10^th year after the account owner dies. Therefore, non-spouse beneficiaries who inherit an IRA or other retirement plan could have tax issues, because of the need to take larger distributions in a shorter amount of time.

Early withdrawal penalty eliminated for IRAs and 401(k)s when new child arrives. Usually, you must pay a 10% penalty when you withdraw funds from your IRA or 401(k) if done prior to 59½. However, the new legislation allows you take out up to $5,000 from your retirement plan without paying the early withdrawal penalty, provided you withdraw the money within a year of a child being born or an adoption becoming final.

There are provisions of the SECURE Act that primarily impact business owners, which include the following:

New multi-employer retirement plans. The new law allows unrelated companies to coordinate to offer employees a 401(k) plan with less administrative work, lower costs and fewer fiduciary responsibilities than individual employers now have when offering their own retirement plans.

Tax credit for automatic enrollment. There’s now a tax credit of $500 for some small businesses that create automatic enrollment in their retirement plans. A tax credit for establishing a retirement plan has also been increased from $500 to $5,000.

Annuities in 401(k) plans. The Act makes it easier for employers to add annuities as an investment option within 401(k) plans. Before the SECURE Act, businesses avoided annuities in these plans because of the liability related to the annuity provider. However, the new rules should help decrease any concerns.

Talk to an experienced estate planning attorney to examine the potential impact on your investment strategies and determine any possible tax and estate planning implications of the SECURE Act.

Reference: Covering Katy (TX) News “Laws Change for IRA and 401K Retirement Savings Plans”

Would a revocable living trust provide protection for my assets?

 

CLICK ON THE LINK ABOVE TO WATCH THE SHORT VIDEO CLIP

A revocable living trust isn't typically used for the protection of assets. Rather, it's used for probate purposes in order to streamline the probate process or eliminate it. It is also used in order to protect assets for the next generation, so that assets in a revocable trust aren't used for the creator's protection of assets, but rather for the heirs, who they leave the assets to and how long they want to leave the assets in the trust so that they are protected for their children, perhaps, their spouse, and or their grandchildren.

 

Should I just give all of my assets to a relative to hold for me?

 

CLICK ON LINK ABOVE TO WATCH THE SHORT VIDEO CLIP

Giving your assets away to a relative to hold them for you may make them unavailable to you in the future. If your relative is sued or they get divorced or they die or they go bankrupt, those assets won't be available to you. It's a better idea to see a certified elder law attorney to assist you with planning to help you preserve your assets for your future.

Are there ways to protect my assets other than using a trust?

 

click the link above to watch the short video

Yes. Assets can be protected in many different ways. How you protect your assets is somewhat dependent on the type of asset, whether it's real property, real estate, or if it's a cash asset, it could be a brokerage account or an IRA, so in order to determine what's going to work best for each type of asset, it's best to talk to a professional to assist you.

 

*click on link to watch short video clip**

Asset protection planning is something that's different for each family and the timing of thinking about protecting assets is also different for each family. When you think about asset protection planing you have to think about your goals and your objectives for yourself, your spouse and your children. When you should start asset protection planning? Well, when you start worrying about asset protection planing.

Would a living trust provide protection for my assets if I were sued?

 

click the link to watch the short video No, because a living trust is like a box with the lid completely open. You can put things in and take things out at will. And because you have full access and unfetted control over the box, your creditors are able to access everything that's in the box.

How can I protect my house?

 

CLICK THE LINK TO WATCH THE SHORT VIDEO There are many techniques available for protecting real estate. It's important to understand that transferring real estate to a child or a friend may not be the best way to protect it as you make that real estate available to that person's creditors, to a divorce they might have, or in the event that they should predecease you in their probate estate. When transferring real estate, use caution, and make sure that you contact an experienced attorney.

 

Do Millennials Want the Family Vacation Home?

Family vacation homes don’t seem to be as valued by millennials, as they were by previous generations.

Minnesota is a good example of a trend that seems to be developing in the U.S., where generations don’t seem to be in agreement on what is valuable for lifestyle, according to MinnPost’s in “The uncertain future of cabins in Minnesota.”  

For generations, people in Minnesota have known when vacation time is near, since families head for the many lakes in the state. However, that tradition may not last another generation, because millennials in their early adulthood are already making it clear that they are more interested in experiences, than ownership of a family vacation place.

Since vacation homes for the family are getting more expensive to buy and maintain, it is getting easier to book a place to stay easily and inexpensively through an online service.

The average lake home or cabin owner in Minnesota today is 68 years old.  They will likely age out of cabin ownership in the coming years. That’s a big transfer of land, say officials at the Minnesota Lakes and Rivers Advocates. That’s up from 58 in 1999 and 62 in 2005. For many families selling the family cabin is a way to pay for end-of-life medical bills.

For others, the question is: do the kids or grandchildren even want to own the property or if it goes up for sale, who’s buying?

It’s more likely that the land will be purchased, and the old cabins will be torn down, only to be replaced with a far more expensive home on the property.

“Over the past few decades, lake properties have dramatically increased in value, making them harder and harder for the average person to obtain,” writes Cameron Henkel, co-founder of a lake property real estate brokerage. Supply is tight, so people must go even farther from metro areas, if budgets are limited.

If your family’s assets include a second home, don’t assume your children want to keep it. Planning for the future starts with a conversation among family members. Do they want to keep it in the family? Will they be able to afford to pay for upkeep and property taxes? Should it be placed in a trust?

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include a family vacation home that may, or may not, be wanted by the next generation.

Reference: MinnPost (April 27, 2018) “The uncertain future of cabins in Minnesota”

Want to Protect Your Family? Set Up an Estate Plan

Creating your estate plan and keeping it up to date, is not generally a difficult project.

If you want your assets distributed as you wish rather than as the state wishes, it is a good idea to spare your family the challenges and get the estate plan completed and up to date, according to Intermountain Catholic in “Retirees Have Several Financial Issues to Consider.”

If your estate plan is not completed and up to date, family members are often left dealing with the expenses of medical care and a funeral. To be left to deal with these issues while grieving adds another layer of heartbreak. It doesn’t have to be this way, because a good estate plan guides them on your wishes.

Many people put off making a will.  This means that their property won’t be distributed as they would want. If you don’t already have a will, contact an estate planning attorney and get started right away. Without a will, your estate will be distributed according to the laws of your state.

Ask your estate planning attorney if a “pour-over trust” is appropriate for your situation.  It puts the property that you own at the time of death into an already-prepared trust, so your trusted heir can succeed you as a trustee and then divide the estate, according to your wishes.

Don’t put your 401(k) or IRA savings accounts into trusts. The IRS will see that as a 100% withdrawal and you’ll be charged the taxes on it for the year the withdrawal was made. That one mistake could, and has, decimated lifetimes of savings.

You’ll want to grant a trusted family member or friend the power of attorney and medical power of attorney, so your affairs can be handled, if you should become unable to do so. If you do not want “heroic measures”—CPR and other medical procedures done to bring someone back to life, if they are unresponsive—then you’ll want a Do Not Resuscitate (DNR) form. That form will need to be with you and you should tell others about it, so they can instruct medical personnel accordingly. Otherwise, EMTs and doctors are required by law to take whatever measures they deem necessary to keep you alive.

If you haven’t already applied for Social Security, you may wish to go to your local Social Security office to discuss what benefits are available to you and how to collect them.

Most seniors qualify for Medicare, but there are many different plans.  It is also likely that you’ll need supplemental plans to cover costs, including prescriptions.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and is best for you and your family.

Reference: Intermountain Catholic “Retirees Have Several Financial Issues to Consider”

Law Protects Some Who Report Suspected Elder Abuse

Dodd-Frank Act made it difficult to report abuse and protect clients.

Financial services providers have been given some protection and encouragement to protect their clients by reporting suspected financial abuse, according to WealthManagement.com in “The New Senior Safe Act Encourages Reporting Financial Abuse.”

Within the new law is the Senior Safe Act (S$A) which began as a bill from Maine Senator Susan Collins. She created the S$A based on Maine’s elder abuse protections. The concept is surprisingly simple: banks and financial advisors are often the first ones to spot elderly clients making uncharacteristic transactions such as large account withdrawals or wiring funds to people who are not family members in distant parts of the globe.

The legislation removes several provisions that were in the Dodd-Frank Act, based on the thinking that certain measures in the act made it harder for financial service providers to act on behalf of their clients.

During the last decade, consumer advocates, state legislators, senior advocates (including AARP) and  numerous financial professionals have attempted to make reporting of financial elder abuse an accepted best practice. The Consumer Financial Protection Bureau in 2016 identified more than 25 states and the District of Columbia that mandated reporting of suspected financial exploitation of the elderly.

A core component of the law links training employees to immunity for both the person reporting the suspected abuse and their institution, including credit unions, investment advisories, broker/dealers, insurance companies and agencies and transfer agents. These are all clearly defined in the S$A.

The institutions need to train their employees while keeping in mind the privacy issues that arise, recognizing the need that the privacy and integrity of their customer’s needs to be respected.

There is one wrinkle that should be noted by financial professionals and institutions. The language is clear that not just any employee who reports possible abuse gains immunity. Rather, the immunity is granted for those who serve as a supervisor or in a compliance or legal function, who act “in good faith” and with “reasonable care.” The law also requires the institutions to keep records on the training its employees undergo and the identity of any permitted abuse reporters. The burden remains on the institution to be sure the correct person reports the suspected abuse.

Reference: WealthManagement.com (May 29, 2018) “The New Senior Safe Act Encourages Reporting Financial Abuse”