Heritage Elder Law

Americans Are Not Saving Enough

It is thought that people can save more through their 401(k) during their working years than  with traditional pension plans.  However, the truth is that they aren’t always saving enough.

A crisis is arising that there isn’t enough saved.  Therefore, the Washington Post asked one of the leaders of the movement from pensions to 401(k)s, Ted Benna, and other experts for some thoughts on the problem in "Why it's so hard for Americans to save for retirement."

Their observations include:

• 401(k) plans have become too complicated for people to understand. They used to be explainable in a few minutes. There are now so many options and fees that people get confused.
• People procrastinate thinking that they will always have time to save later.
• People who do not get a 401(k) through an employer, often do not take advantage of their option to get individual retirement accounts.
• The people who most need to save early, who are those with the least amount of income, are not the ones who are most incentivized by tax policy to use retirement accounts.

At Heritage Elder Law, we work with trusted financial planners who can help you get started on the right path for retirement, or help you be certain you are saving enough.  If you need some help finding a financial planner who is the right fit for you, let us help.  Call Heritage today at (724) 841-0004.

Reference: Washington Post (Sep. 15, 2017) "Why it's so hard for Americans to save for retirement."

 

Only Morons Pay Estate Tax?

Regardless of language, the White House has an interesting viewpoint of the estate tax.

In an attempt to convince the Democrats that the estate tax is not needed, White House advisor Gary Cohn justified its elimination by explaining that only morons pay it, according to CNBC in "'Only morons pay the estate tax,' says White House's Gary Cohn."

The White House has denied that is the exact language Cohn used. However, regardless of the language, the sentiment behind the comment may not be entirely wrong.

While it is not true in all cases, most of the time the estate tax can be avoided through estate planning.

The people whose estates end up paying the tax are those who have not done much estate planning or those who have other reasons for not avoiding the estate tax in their planning.

Of course, this does not bring the parties any closer together.

The White House argues that money spent to avoid the estate tax is an economic waste, so the tax should be eliminated.

Democrats argue that ways to avoid paying the tax should be eliminated.

Political viewpoints aside, our attorneys at Heritage Elder Law can help you prepare an estate plan that suits your unique circumstances.  Call today!  (724) 841-0004

Reference: CNBC (Aug. 29, 2017) "'Only morons pay the estate tax,' says White House's Gary Cohn."

 

 

If Tax Reform Passes There Are Still Options

With Congress talking about tax reform and how to pay for it, one thing being considered is to eliminate the 1031 exchanges, according to the Financial Advisor in "What To Do If Congress Eliminates 1031 Exchanges."

One of the reasons people purchase homes is that the price of real estate almost always goes up. The home is an investment.

When someone buys a house and it is sold years later, it is generally worth more than the original purchase price. The seller can use the gain to purchase a better home.

However, there is a potential roadblock in the way.

The difference between the original purchase price and the selling price is a capital gain.  It can be taxed, which would make people less willing to sell their homes.

The seller can use Section 1031 of the tax code, which eliminates any capital gains tax, if the income is used to purchase something similar, such as another home.

The same logic and rule holds true for other types of investments, including stocks and bonds.

While it is probably unlikely that the popular and useful Section 1031 will be eliminated, there is no reason to panic, if it happens.

There are other methods that can be used to reduce or eliminate capital gains taxes that an estate planning attorney can explain.

These methods include things such as grantor retained annuity trusts, charitable remainder trusts and family limited partnerships.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.  Attend a free workshop to learn more.  Register online at www.HeritageElderLaw.com or call (724) 841-0004.

Reference: Financial Advisor (Aug. 28, 2017) "What To Do If Congress Eliminates 1031 Exchanges."

 

Disbursements Crucial in Retirement Accounts

If the minimum amount is not taken out of retirement accounts, there could be stiff penalties, according to the Financial Advisor in "50% Tax on Missed RMDs May Be Waived."

Money is put into qualified retirement accounts on a pre-tax basis. No income tax needs to be paid on the money at that time.

The government is counting on the money in the retirement accounts being withdrawn someday, and then taxing it. The government actually hopes to make more money overall through this arrangement.

Not understanding the government's reasoning, many people do not know that when they reach the age of 70 and a half they are required to take annual minimum disbursements out of their accounts. The government wants its taxes paid.

If the required minimum amount is not taken out, then the IRS will tax the amount that should have been taken out at a steep rate of 50%. The government wants the hoped for tax money.

The good news is that the rate is so high not necessarily to be unduly punitive, but as a way to make sure the taxpayer does not make the same mistake twice.

That means the IRS will often waive the penalty.

If you have a question regarding Elder Law, check out our website at www.HeritageElderLaw.com or call (724) 841-0004.

Reference: Financial Advisor (Aug. 14, 2017) "50% Tax on Missed RMDs May Be Waived."