Choosing the Right Tax Professional in 5 Easy Steps

Why do you need a tax professional?

Tax Professional Managing taxes during retirement will be the single most important factor in determining your ultimate lifestyle.  In addition to a financial planner and estate planning attorney, a qualified tax professional is an integral part of any planning team.

1.  Ask for references.  Have you ever stopped to think about how you picked your doctor or mechanic?  Chances are you chose them because a friend or family member recommended them based upon a positive experience.  The same should be true of your tax professional.  Often times, people are afraid to ask for advice from those closest to them when finances are involved, but picking the right tax professional is too big of a decision, so “do your homework” and ask around.

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“See-Through” Trusts

See Through TrustsClients often ask if they should leave their IRA to their trust. This can be a complicated question. Trusts can be complex and retirement accounts are not like other assets. IRAs are subject to a very rigid set of rules under the tax code. Seek help from an advisor that is very familiar with all the rules in this area, especially the requirements for a trust to be a qualified see-through trust. Meeting these requirements is the only way the valuable “stretch” advantage can be used by trust beneficiaries.

Trusts Offer Control

Naming a trust as an IRA beneficiary requires extra steps that will cost clients both time and money. An attorney will need to be consulted to draft the trust. Clients will want to be sure that the attorney they choose has extensive knowledge of the very specific area of the law where retirement plans and trusts intersect.

For some, this extra effort will be worth it. Naming a trust as the beneficiary of an IRA gives the IRA owner a high level of control over his or her retirement assets after death. This is why a trust can be a good strategy in second marriage situations, when young children are involved, or when intended beneficiaries cannot manage their finances well.

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5 Ways to Avoid the Time and Expense of Probate

By Jeffrey Levine, Director of Retirement Education
Ed Slott and Company, LLC

Expense of ProbateDeath is inevitable. It comes for us all at one point or another. Some sooner than later, but none can escape its grasp. Whenever that time comes, your “stuff,” including your financial assets, generally live on, and are still essentially yours until they are legally transferred to another person or entity. That transference of assets can occur in any number of ways, but often includes a process known as probate. Here’s how to avoid the time and expense of probate.

What exactly is probate? It’s a process whereby a deceased person’s will is proved, or validated, by the courts and can then be executed. Assets and other possessions included in the deceased person’s probate estate can then be distributed to the intended recipients.

While probate cannot always be avoided, when possible, it can pay to limit your probate expense. There are several reasons this might be the case including the fact that probate can be a very time-consuming and expensive process. Another big downside to probate is that it’s a very public process. Your will – and the provisions therein – become public record. For some, this loss of privacy, alone, is enough to try and find other means of passing assets to heirs. With that in mind, here are five ways you can avoid the expensive, time-sucking and public process known as probate.

1) Don’t Name Your Estate as Your IRA Beneficiary

When it comes to your IRA – or any other retirement account for that matter – it should pass to your heirs by way of beneficiary form. A beneficiary form is a legal document that allows the assets it controls to pass directly to the named recipients, and avoid the perils of probate. These beneficiary forms have so much power, in fact, that if your beneficiary form says “I leave my IRA to my ex-spouse,” but your updated will says “I leave all my assets to my current spouse,” guess who’s getting the money!? That’s right, your ex! (Side note: At that point, it’s probably a good thing you’re already dead.)

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Avoiding 60-Day Rollover Mistakes

What is a 60-day rollover?60-Day Rollover money

A 60-day rollover is the distribution of funds from a qualifying retirement account payable to the account owner who then has 60 days to redeposit the funds into another qualifying retirement account.

1.  Do trustee-to-trustee transfers instead.  The best way to avoid making a 60-day rollover mistake is to avoid 60-day rollovers!  Transfer your funds directly to another retirement account.  Not only does a direct transfer avoid any 60-day time problems, but if the rollover is coming from a 401(k) or other qualified plan, it will also avoid the mandatory 20% withholding requirement.

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