As part of 2017 Tax Act, beneficiaries of inherited IRA’s no longer could take required minimum distributions (RMDs) over their life expectancies. Instead except for spouses and disabled children, they must do so within 10 years. There was a question as to how beneficiaries were to go about removing the funds. Could they wait until the 10th year and remove it all or did they have to take it out periodically. The answer as always is, “it depends”.
If prior to death, the account holder was taking required minimum distributions, then the beneficiaries have to continue taking decedent’s RMDs and close the account in the 10th year. If decedent was taking no RMDs prior to death, then the beneficiary doesn’t have to remove funds until year 10. This means that the money can grow tax deferred creating a larger return over the 10 year period. Unless you have qualified Trust provisions, Trusts must take the funds out within 5 years. So, it is not necessarily good to name your revocable trust as a beneficiary on your IRA.
Category Archives: Trump tax bill
2025 is inching closer
All of the Trump era tax cuts expire in 2025. One of the primary ones is the Estate Tax Exemption amount was raised from $5 Million per person to $10 Million per person ($20 Million per couple). If you’re estate is above $10 Million, now might be a good time to start making gifts. The IRS has issued guidance stating that if you made gift before 2025, the gift will be honored. (Of course Congress can always change that). There are a number of Trust options available to you to allow you to keep the income from the property and give away a remainder. Also with interest rates jumping up 1000% in 2022 (0.44% to 4.8%) , some planning techniques should be explored sooner rather than later as the Federal Reserve continues to tighten the money supply.
COVAD Stimulus Payments to Dead People
Some dead people are beginning to get stimulus checks/deposits. No this is not Mayor Dailey buying votes, it is actually legal. Under Section 2101 of the CARES Act, it allows for otherwise eligible payments to go to Estates or Trusts. Paragraph C defines “Eligibile Individuals” to include Estates and Trusts. So, if you get a check direct deposited into a dead persons’ account, it is perfectly legal and can be used by the Estate as long as other criteria (less than $75,000 of income in 2019, meets minimum income requirements).
COVAD-19 payments
The payment of $1,200 ($2,400 for joint filers) is calculated from your most recent tax return. If your adjusted gross income was above $75,000 ($150,000 for couples) the $1,200 payment is reduced by $50 for every $1,000 your income exceeds the limit above. For example is a couple makes $200,000. That’s $50,000 more than the limit. So, $50 x 50 = $2,500. So, no payment. On the other hand if they were at $175,000, then the reduction is $1,250 and they would get their $2,400 reduced by $1,250. So, what year do they look at? The calculation year is the last filed year, but it is trued up after your 2019 tax return is filed. So, if you had lower income in 2018 and higher income in 2019, you might get a bigger check, but will owe some or all of it back at the end of the year. On the other hand if your income in 2019 was lower than 2018, then it would behoove you to file ASAP. The payment will offset anything you might owe this year in taxes. Needless to say, it will be a headache for the next year.
Merry Christmas you filthy animal
We have a triple whammy as we enter the new year. New tax rules with more limited itemized deductions, a Government shutdown, and rising interest rates. Historically, when rates rise real estate prices go down or stagnate, when the Tax Act of 1986 was passed and took full effect with the loss of subsidies for investment in real estate, real estate prices plummeted. This could get ugly. The moral is this. If you want to buy real estate, it might be a good time to wait for prices to drop a little (especially if we have a drawn out government shutdown in the DC area). This of course has to be balanced with the risk that interest rates may rise further. So, be careful out there. Oh, and have a Merry Christmas and remember to celebrate Christ’s birth as the reason for the season.