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Don’t make the mistake of leaving your grandchildren with a tax bill instead of an inheritance

Dont make the mistake of leaving your grandchildren with a tax bill instead of an inheritance

Posted By Lineweaver Financial Group
July 13, 2023 Category: Finance, Tax, Inheritance, Trust, 529, IRA

For older Americans, leaving retirement savings to their grandchildren without also leaving them a big tax bill is becoming harder under new rules that took effect in 2020.  Previously, heirs other than spouses had decades to draw down inherited retirement accounts. After the rules change, now they must do it within 10 years.  To maximize their family’s after-tax wealth, grandparents are changing their estate plans and creating new trusts. The timing change also has grandparents making a series of Roth conversions or big generation-skipping lifetime gifts. These choices make sense with the amount of money and taxes that are at play. According to the Investment Company Institute, Americans held $12.5 trillion in IRAs as of March 31, 2023 and 52% of households headed by someone 65 or older have one.    By choosing to leave a Roth IRA, you avoid some of the problems of the accelerated tax hit from an inherited traditional IRA since those can cause a big tax bill, especially if distributions fall during the heir’s highest earning years. Minor grandchildren may also need to file a tax return to report the IRA payouts, and the income could be taxed at the parents’ rate.  However, because of the 10-year payout period, there is a risk that your heirs will spend the money quickly.  Other options to consider when planning your legacy is to start making lifetime gifts to grandchildren as soon as they are born. That can look like pay

Bipartisan Support in Congress to Make Retirement More Secure

Posted By Lineweaver Financial Group
July 02, 2019 Category: Congress, Retirement, IRA

by LFG Tax Director, Mark Sipos On May 23rd, 2019, the U.S. House of Representatives voted overwhelmingly in favor of the SECURE Act, which stands for "Setting Every Community Up for Retirement Enhancement." Most of the provisions in the act are designed to make it easier for more people to save for retirement, and for more employers to offer retirement plans for their employees. One notable provision in the bill would essentially end what's known as the "stretch IRA." Under the current law, when a beneficiary inherits an IRA, the beneficiary can choose to have the IRA balance distributed in two ways: either in required minimum distributions based on his or her life expectancy, or during the five years after the original account holder passes. Making maximum use of the IRA's taxdeferred compounding like this is known as a "stretch IRA." Under SECURE, in most instances an inherited IRA would have to be fully distributed within 10 years of the original owner's death, although there are some exceptions. Some additional areas the bill covers are as follows: • The repeal of the maximum age for traditional IRA contributions, which is currently 70½ • An increase of the required minimum distribution age for retirement accounts to 72 (up from 70½) • Allowing long-term part-time workers to participate in 401(k) plans • Increase of the auto-enrollment safe harbor cap to 15% from 10% • Allowing more annuities

Avoiding Costly Mistakes with Your IRA Distributions

Avoiding Costly Mistakes with Your IRA Distributions

Posted By Lineweaver Financial Group
February 21, 2018 Category: RMD, IRA, Distribution, Taxes

At age 70 you need to be aware of these rules.  If you have retirement accounts, the IRS has allowed you to have assets growing in those accounts without paying income taxes on the income or gains. At age 70 ½, the IRS wants to begin taxing those accounts by making you take money out, whether you want to or not. Required Minimum Distributions (RMDs) are one of those facts of life that many dread, and that make life even more confusing and complicated. Let’s try and reduce the confusion. For retirement account owners, the RMD rules apply to Traditional, SEP and SIMPLE IRAs, qualified plans like 401ks, 403(b)  and governmental 457(b) accounts. The RMD rules do not apply to Roth IRA owners, but they do apply to Roth IRA beneficiaries. If a non-spouse inherits a Roth IRA, they are required to take RMDs no matter what their age is, just like the non-spouse beneficiary of all retirement accounts. A word of caution: if you inherit an IRA from someone other than your spouse, you must begin taking RMDs the year after the death of the owner, not when you reach 70 ½. Penalty for non-compliance, 50% of the amount you should have withdrawn! Generally, your first RMD is due for the year you reach age 70.5. However, you need not start receiving distributions from your retirement account until your required beginning date (RBD). Generally, your RBD is April 1 of the year following the year you reach age 70.5. If you are still employed at age 70.5 and you parti

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Case studies are intended to illustrate the types of financial issues faced by actual clients. They should not be construed as a testimonial for or endorsement of Lineweaver Wealth Advisors. They do not represent the experience of any advisory client. Each client’s situation is different, and their goals may not always be achieved. Lineweaver Wealth Advisors, LLC, is not engaged in the practice of law or accounting. Tax information provided is general in nature and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time.
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