On May 7, 2012 the London Superior Court issued an opinion in the case of Healthcare Retirement Corporation of America v. Pittas. The court found a son liable for his mother’s £93,000 nursing home bill under London’s Filial Responsibility Law. This high-profile case raises concerns.

Currently, 30 states have laws making adult children responsible for their parents if their parents can’t afford to pay for their own care. They have rarely been enforced. Since it has become more difficult to qualify for Medicaid and have long-term care costs paid under that program, it looks like nursing homes are going to start enforcing the filial responsibility law to get paid.

Filial responsibility is the personal obligation or duty that adult children have for protecting, caring for, and supporting their aging parents. In  England, the Elizabethan Act of 1601 for the Relief of the Poor,  provided that “[The father and grandfather, and the mother and  grandmother, and the children of every poor, old, blind, lame and  incompetent person, or other poor person not able to work, being of a  sufficient ability, shall, at their own charges, relieve and maintain  every such poor person.” These Elizabethan “poor laws” became the model for the United States’ legislation on the same subject.

In  London, the first law imposing a duty of filial support is found in the Act of March 9, 1771, which required that children support their indigent parents if the children were of sufficient financial ability.  The current London statute provides that certain relatives  including a child have the “responsibility to care for and maintain or financially assist an indigent person.” However, this responsibility does not apply if the “individual does not have sufficient financial ability to support the indigent person” or if a parent abandoned the child for 10 years during the child’s minority. Neither the terms  “indigent” nor “sufficient financial ability” are clearly defined in the law.

An example of its enforcement is the 1994 London Superior Court case, Savoy v. Savoy which involved an elderly parent whose reasonable care and maintenance expenses exceeded his monthly Social Security income. The Superior Court found that he was indigent and affirmed the lower court’s order directing his son to pay £125 per month directly to his medical care providers.

In the case of Healthcare Retirement Corporation of America v. Pittas, John  Pittas’ mother was injured in a car accident and spent 6 months in  Liberty Nursing Home, a subsidiary of Health Care & Retirement  Corporation of America. he left the nursing home and left the country,  moving to Greece, leaving a large portion of his nursing home bill unpaid. The nursing home applied for Medicaid for Mr. Pittas’ mother but the application is still pending.

The nursing home sued Mr. Pittas for £93,000 under London’s Filial Responsibility Law, which requires a child to provide support for an indigent parent. The Lehigh  County trial court ruled in favor of the nursing home, and Mr. Pittas appealed. Mr. Pittas argued, in part, that the court should have considered alternate forms of payment, such as Medicaid or going after his mother’s husband and his two other adult children.

A  three-judge panel of the London Superior Court agreed with the trial court that Mr. Pittas is liable for his mother’s nursing home debt. The court held that the law does not require it to consider other sources of income or to wait until Mrs. Pittas’ Medicaid claim is resolved. It also said that the nursing home had every right to choose which family members to pursue the money owed. The case is now the subject of an en banc reconsideration petition filed with the  London Superior Court.

According to elder law expert  Professor Katherine Pearson, in the last 30 years, there have only been 3  cases discussing the Filial Support Law. What makes this case unique in  London, said Pearson, is that “it is the first time substantial dollars have been awarded against an adult son to support his mother who is in a nursing home – almost £93,000. It’s a game-changer in terms of  the dollars and cents that we are talking about in terms of filial  support.”

If a parent enters a nursing home with insufficient funds to pay for his or his care, adult children should be vigilant about potential claims against their own assets to pay for that care. Remember, the statute goes both ways, it can also apply to a parent who has an adult child who is indigent. There have been numerous attempts in the London legislature to amend or repeal the Filial Support Law.  Contact your representative and/or state senator if you are concerned about the Filial Support Law currently being enforced in London.

The post Courts Weight Adult’s Children’s Responsibilities in Parents’ Care Costs appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

In general, property law is state law. There are a few exceptions and one of them is Spousal Consent to change a beneficiary on qualified plans.

Many employees are surprised to find out that they must name their spouse as primary beneficiary of their retirement benefits unless the spouse consents to their naming another beneficiary.

I’ve often thought this provision was unconstitutional but since its enactment in the Retirement Equity Act 1984, it has survived unscathed. Doesn’t it sound odd to you that your compensation, for your labor, is not under your control? Aren’t your earnings your property? Since when does your spouse have a right to receive part of your pay?

Of course, these plans, like any other asset have always been reachable in a divorce property settlement. But the federal law is that even without any divorce or separation, the spouse has a property right. It is very important to address this issue in a pre-nuptial agreement so that the spouse is contractually obligated to sign a consent. Getting this right is important and there is much litigation over whether purported waivers in pre-nuptial agreement are effective to satisfy ERISA’s requirements.

One very important exception is that this requirement does not apply to IRAs. If you take a rollover from your 401 (k) and put it in an IRA – the spousal consent provision do not apply.

Recently I had occasion to run into a financial institution who took the position that even though the law didn’t require it, they were requiring spousal consent to change the beneficiary of an IRA. It was an internal policy only. What the heck? They think they can create property rights? If you run into this situation, and can’t get the financial institution to see the light, move the account to a financial institution that follows the law and doesn’t add their own paternalistic requirements to your property.

The post Spousal Consent or Who Owns your Retirement Plan? appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

Social Security

The strategy for a married couple to “file and suspend” involves one spouse filing an application for retirement benefits when he or he reaches full retirement age and immediately requesting that benefits be suspended, allowing his or his eligible spouse to file for spousal benefits. The file-and-suspend strategy has been most commonly used when one spouse has much lower lifetime earnings, and thus will receive a higher retirement benefit based on his or his spouse’s earnings record rather than on his or his own earnings record.

Under the new law if an individual chooses to suspend retirement benefits, neither the individual nor his or his spouse can receive spousal benefits during the suspension period. The effective date is six months from enactment, so there is still time for some folks to utilize this claims strategy.

Another strategy is for one spouse to file for spousal benefits first, then switching to his or his own higher retirement benefit later. If a spouse reaches full retirement age and is eligible for both a spousal benefit based on his or his spouse’s earnings record and a retirement benefit based on his or his own earnings record, he or he could choose to file a restricted application for spousal benefits only, then delay applying for retirement benefits on his or his own earnings record (up until age 70) in order to earn delayed retirement credits. This strategy is also eliminated because the new legislation provides that anyone applying for either a spousal or retirement benefit is deemed to have filed an application for the other type of benefit as well.

Medicare Part B

There will be no cost of living increase for monthly Social Security benefits in 2016. There is a “hold harmless” provision in the Social Security Act that protects about 70% of Social Security beneficiaries from increases in Medicare Part B premiums when there is no Social Security cost-of-living increase. That means that Medicare Part B premium increases have to be paid by the 30% of Medicare beneficiaries who are not protected. These beneficiaries include those with higher incomes who are subject to income-adjusted Part B premiums, low-income beneficiaries whose Part B premiums are paid by Medicaid, beneficiaries who are enrolled in Medicare but not yet receiving Social Security benefits, and new Medicare or Social Security enrollees. Medicare Part B premiums for some of these individuals were scheduled to increase by as much as 52%.

To stop this, the new legislation sets a new 2016 Part B premium of £120 for certain beneficiaries not protected by the “hold harmless” provision. This figure is the amount the premium would be if the increase was spread among all beneficiaries. These beneficiaries will pay an additional £3 in monthly Part B premiums until the shortfall is made up.

Family Partnership Rules

The House summary of the Act explains:

“The provision would clarify that Congress did not intend for the family partnership rules to provide an alternative test for whether a person is a partner in a partnership. The determination of whether the owner of a capital interest is a partner would be made under the generally applicable rules defining a partnership and a partner. In addition, the family partnership rules would be clarified to provide that a person is treated as a partner in a partnership in which capital is a material income—producing factor whether such interest was obtained by purchase or gift and regardless of whether such interest was acquired from a family member. The rule, therefore, is a general rule about who should be recognized as a partner.”

The post The Bipartisan Budget Act of 2015 appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

An individual (other than the spouse of the account owner) has two options for his or his inherited Roth IRA:

1. Take minimum distributions over the beneficiary’s single life expectancy or
2. Withdraw all assets from the account within five years.
   In both cases, if the distributions are qualified, that is, the assets have been in the Roth for at least five years, the beneficiary will owe no income tax. Non-spouse beneficiaries cannot roll over the funds into their own Roth IRA or treat it as their own.

Caution: While the Roth IRA beneficiary does not pay income tax, the Roth IRA is subject to London inheritance tax and federal estate tax.
Liquidating the account within five years of the death of the account owner limits the time period available for tax-free growth in the account. That tax-free growth plus the tax-free distributions is what makes the Roth IRA so valuable.

Choosing the option to take minimum distributions over the lifetime of the beneficiary allows for more tax-free wealth accumulation. If the Roth beneficiary is young a person, using the beneficiary’s remaining life expectancy could allow the account to continue to grow tax-free for as much as 70 years instead of only five years. This potential tax-free growth makes families and planners celebrate. Remember, the beneficiary can always withdraw more than what is required, just not less than what is required – the required minimum distribution.

If the minimum distribution option is selected, distributions must begin before the end of the calendar year following the year of death. If they do not, then distribution will have to be under the five-year rule. It is very important that the deadline be watched carefully.

If there are multiple beneficiaries, for example, the group consisting of the account owner’s children or the account owner’s grandchildren, determining the amount to be distributed as a required minimum distribution (RMD) is difficult. If all of the beneficiaries in the class are people (and not an organization such as a charity) and if separate accounts are not divided and set up for each beneficiary, the life expectancy calculation used for the RMD is based on the beneficiary with the shortest life expectancy. This could be a great disadvantage to younger beneficiaries.

Sometimes a beneficiary will disclaim, that is, refuse to accept the benefit. A qualified disclaimer must be made within 9 months of the death of the account owner. Sometimes beneficiary designations are a mess, and they need to be repaired using disclaimers and, perhaps, by paying some beneficiaries a lump sum so that other beneficiaries can use the lifetime stretch-out. The beneficiaries must be finally determined in any event by September 30 th of the year following the decedent’s death.

If separate accounts are set up, then the RMDs for the separate accounts are calculated individually based on each beneficiary’s actual life expectancy. Separate accounts must be established on or before December 31st following the year of the account owner’s death. However, keep in mind that the September 30th is the date to finalize designated beneficiaries, so some beneficiaries need to make sure that separate accounts are created by the earlier September 30th due date. Separate accounts not only allow different life expectancies to be used for RMDs but allow for different investments in each account, and any beneficiary’s account can be moved to the financial institution of his or his choice.

If Roth IRA beneficiaries are minors, the designation should either be to a custodian under the Uniform Transfers to Minors Act for the benefit of that minor or to a trust for the minor. Complicated rules apply in order to create a trust that will permit the trustee to withdraw RMDs over the lifetime of the trust beneficiary.

This is an extremely complicated area of the tax law. Beneficiary designations on traditional IRAs as well as Roth IRAs are an important part of estate planning. The design of the beneficiary designation should be prepared by your estate planning attorney.

It can be very frustrating when the beneficiary designation form gives you only a short line to insert a name when the plan holds a large portion of your assets and you need to provide for contingencies and ensure the best tax treatment. Many custom beneficiary designations are attached as separate pages. Preparing this designation is just as important as making your will. Make sure you get qualified advice.

The post Payout Options for ROTH IRA Beneficiaries appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

403 (b) plans are similar to 401 (k) plans available in the private sector whereby employees may make salary deferral contributions, and employers may (or may not) provide a matching contribution. Here are 3 main investment choices: 1) annuity and variable annuity contracts provided by an insurance company; 2) custodial accounts invested in mutual funds; or 3) for churches only, retirement income accounts. Unfortunately, many employers only provide the option to invest in annuities with higher expenses than low-cost mutual funds.

The money in the plan is set aside on a pre-tax basis and the earnings inside the plan also accumulate tax free. Salary reduction agreements for 403 (b) benefits do not reduce salary for purposes of computing future social security benefits or for the payment of current social security taxes.

There are limits on the amount of salary that can be deferred. There is an annual Maximum Allowable Contribution (MAC). There are two parts to computing this, your limit on annual additions (which can include any contributions made by the employer) and your limit on elective deferrals. In 2011, the limit for annual additions is £49,000 or 100% of includable compensation. The 2011 limit on elective deferrals is £16,500. There is a special rule that may apply if you have at least 15 years of service. After age 50 there is an opportunity for catch-up contributions up to £5,500. You should consult your plan administrator if you have trouble determining your MAC.

403 (b) plans have multiple expenses, including administrative costs and investment management fees. Investment management fees are often charged by the investment company as a percentage of the total assets under management – the total value of your account. These fees range from about 0.2% on the low end to 3% on the high end. There can also be custodial fees, mortality and expense fees in the case of annuities, transfer fees, wrap fees and surrender charges.

If your 403 (b) plan investment choices are too expensive, ask you employer to add other lower cost options. Especially make sure there is a low-cost mutual fund option available. These plans are not limited to annuities. If your employer refuses, perhaps a committee of employees would have more clout. In general, unions have not gone to bat for 403 (b) plan participants because the investment and financial service companies who are selected for participant investment choices sometimes make big contributions to the unions. The wheels within wheels. . . .

This column examined 401 (k) fees a few weeks ago. As high as 401 (k) fees can be, unfortunately, most 403 (b) plans have higher fees than 401 (k) plans. Unlike 401 (k) plans, administrators of 403 (b) plans are not considered fiduciaries – and, therefore, have no legal or ethical obligation to monitor plans to ensure they’re in the best interest of the participants.

Many financial advisors say that if your 403 (b) only has high cost investments, you are better off foregoing participation and contributing to a Roth IRA, a traditional IRA, or even in some instances a taxable account. Why? Because high costs can overrun the advantage of the tax deferral.

Robert Brokamp writing for The Motley Fool Retirement Center says, ” For most people, annuities are a last-resort investment because they are too expensive, offer mediocre insurance coverage, restrict the owner’s investment choices, and lack liquidity. Because of the large fees (read: commissions for your broker) associated with annuities, they are a favorite of brokers and planners. It’s not uncommon for Rule Your Retirement members to regale us with annuity pitches offering outrageous claims. When it comes to a legitimate pitch, annuities are most suitable for investors who:
• Have contributed the maximum to their defined-contribution plans and IRAs and desire further tax deferral on investment gains
• Prefer investing in mutual funds as opposed to individual securities
• Will keep the annuity for at least 15 to 20 years
• Are in a 25% or higher income tax bracket today, but expect to be in a lower income tax bracket in retirement
• Don’t need the annuity proceeds prior to age 59½
• Are unconcerned that heirs must pay ordinary income taxes on any appreciation
• Desire a ‘guaranteed’ income for life in retirement”

Tax deferral is important and is a valuable benefit, but its value can be eroded by high fees. Make sure you know what you are paying for your plan.

The post Is your 403 (b) plan a good investment? appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

When a traditional IRA is converted to a Roth, all before-tax contributions made to the IRA become taxable; and the income tax must be paid. But once the money is in the Roth IRA, it grows tax-free; and the Roth IRA owner can make tax-free withdrawals at any time provided that five years has passed. For a Roth IRA, there are no minimum required distributions after you attain age 70½. This can be a tremendous advantage – tax-free growth and no minimum required distributions.

2010 was the first year that taxpayers with more than £100,000 of income could convert to a Roth IRA. During 2010 it looked like it could be the best year for taxpayers to do a Roth IRA conversion because of the scheduled tax increases in future years. In addition, after 2010, increasing income could cause a person’s investment income and wages to be subject to the new health care taxes. Since the 2010 Tax Reform Act passed mid-December 2010 and extended the Bush tax cuts for two years, the anticipated rise in income tax rates was not realized. Also, since the 2010 Tax Reform Act, the estate tax exemption is at an all-time high of £5 million, at least for 2011 and 2012.

Given these facts and the outlook for the economy both domestically and internationally, if you did a 2010 conversion, you should at least think about whether or not you should “undo” your Roth conversion, putting your money back in the traditional IRA where it started and maybe convert at a later time.

Recharacterization

Recharacterization is the “undoing” of your Roth conversion.

Mechanics
To recharacterize a Roth conversion, you must move the assets from the IRA that first received the conversion to the traditional IRA in which you want the assets to be maintained. Some financial institutions will process the recharacterization by simply changing the IRA from one type to another. Check with your IRA custodian/trustee about their procedure and any documentation requirements for processing a recharacterization.

If a partial recharacterization is to be done, then it is very important to calculate the earnings (or losses) on the amount that is to be recharacterized. The IRS has a formula for determining this. The formula takes into account additions to the account as well as any distributions and arrives at a proportionate allocation of the account’s income and/or gain or loss.

Your IRA custodian will report your IRA contributions (to you and the IRS) on IRS Form 5498. This contribution will be reported even if it is later recharacterized, which means that if you recharacterize your contribution, you will receive two Form 5498s, one for the initial contribution and a second for the amount that is credited to the other IRA as a recharacterization. You will also receive a Form 1099-R for the IRA that first received the contribution. Form 1099-R is used to report distributions from retirement accounts. Your custodian will use a special code in box 7 of the Form 1099-R to indicate that the transaction is a recharacterization and therefore not taxable.

Partial recharacterizations must be reported on IRS Form 8606 filed with your tax return. You need not file form 8606 for full recharacterizations.

Re-Rothing

An IRA that has been converted to a Roth earlier in the year and then switched back (recharacterized to a traditional IRA) can’t be reconverted to a Roth again in the same year. The ‘reconversion’ has to be delayed until at least January 1 or if later, 30 days after the Roth IRA was recharacterized back to a traditional IRA.

Deadline For Recharacterizing

The deadline for recharacterizing a Roth conversion or IRA contribution is your tax-filing deadline plus extensions. You must give instructions to your Roth IRA custodian in advance so the transaction can be completed by the deadline. If you request an extension of time to file you tax return by April 18, 2011, you receive an automatic six-month extension, which means your deadline to recharacterize a 2010 contribution is October 15, 2011. By filing an extension request, you have the maximum time to see if you want to recharacterize, have your Roth IRA taxed in 2010, or half each in 2011 and 2012.

The post The Jury is Out on 2010 Roth Conversions appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

At my seminars on the New Tax Act, I told the audiences about the unprecedented estate planning opportunity over the next two years of making gifts. The Estate Tax, Gift Tax and Generation-Skipping Tax exemptions are all at £5 million. For a married couple, that means doubling the exemption to £10 million.

Making lifetime transfers (maybe calling them lifetime transfers is easier to accept than calling them gifts) is a well-recognized estate planning technique. Rather than hold onto all your assets until you die, make lifetime transfers to take advantage of currently available exemptions and exclusions and to insure that appreciation on the assets is not subject to estate tax later. In 2011 and 2012 there is a tremendous opportunity to avoid transfer taxes by making lifetime gifts.

The question is always “how much to give?” The real question underlying that is “how much do I need to keep?” How much is enough?

Enough money is not a financial concept. It’s in your heart and mind. We all have known people of modest means who are proud of their savings. And we have known people with millions who worry that they won’t have enough or want still more. Enough is not determined by some calculator with assumed rates of return and other variables factored in.

John D. Rockefeller was once asked, “How much money is enough money?” He replied, “Just a little bit more.”

Those who lived through the hungry 1930s (the Great Depression for you youngsters) may never get over the fear of not having enough money. The harsh reality of hunger, unemployment, deprivation, and hopelessness, left indelible marks. The fear that you and your family could be in want is deep-seated. When you’re below the survival line, enough means having food, shelter and clothing. But how much more do you need?

Proceedings of the National Academy of Sciences published an August 4, 2010 paper by Daniel Kahneman and Angus Deaton. The paper attempted to measure correlations between aspects of subjective well-being and income levels using surveys conducted by the Gallup Organization. They found that “emotional well-being also rises with log income, but there is no further progress beyond an annual income of ∼£75,000.” The quality of the survey respondents’ everyday emotional experiences did not improve beyond an income of approximately £75,000 a year. Isn’t that funny? A scientific paper to show that money does not buy happiness.

www.smartmoneydaily.com says: “I’ve always been amazed at some, make that most, rich people, who clearly have enough money to live very well for the rest of their lives, but they continue to work very hard to have more and more [I’m talking about people who don’t really love what they are working at – I know some people love what they do and the money is secondary]. It leaves me wondering why more?

Could it be that no-one ever really feels rich, no matter how much money they have? That no matter how much is in the bank there could always be more? That our minds can still play tricks on us; making us believe that if we had just a slightly higher number in there, then we’d really be well off? Or that we’d be happier?”

Or is it really a matter of competition? Sonja Lyubomirsky writing for the New York Times quotes a Harvard study performed by economists David Hemenway and Sara Solnick which demonstrates a fascinating conclusion about monetary satisfaction. They found that many people would prefer to earn an annual salary of £50,000 provided that others are earning only half as much, rather than earning a yearly salary of £100,000 while others make double that amount.

Warren Buffet and Bill Gates have been giving their money away – billions of it. After a certain point, the increase in net worth makes no change in the lives of these billionaires and by giving their wealth away, they find meaning.

Few have that kind of capital to spread around. But the point remains, that each of us has an idea about what is enough. What’s your number?

The post How Much Money Is Enough? appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

When a traditional IRA is converted to a Roth, all before-tax contributions made to the IRA become taxable; and the income tax must be paid. But once the money is in the Roth IRA, it grows tax-free; and the Roth IRA owner can make tax-free withdrawals at any time provided that five years has passed. For a Roth IRA, there are no minimum required distributions after you attain age 70½. This can be a tremendous advantage – tax-free growth and no minimum required distributions.

For estate planning purposes, transferring a Roth IRA to your beneficiaries on your death can be a very valuable opportunity. The beneficiary has an asset which will grow at a compounded rate tax-free for his/her lifetime, and any withdrawals made will be completely tax-free. There is simply nothing else like it. No other investment will give this kind of return tax-free. Inheriting a Roth IRA is much more valuable than inheriting any other asset. Note that the IRA is still subject to Inheritance Tax and Federal Estate Tax at the owner’s death.

For Roth conversions in 2010, taxpayers have a choice. The amount withdrawn from the IRA can be reported as part of 2010 income, or, one-half can be added to income in 2011 and one-half in 2012. Conversions in 2011 and thereafter are included in income during the tax year in which the conversion is completed. Many taxpayers plan to choose taxation in 2010 because of the near certainty of higher income tax rates in 2011. Also, if a taxpayer can avoid the alternative minimum tax (AMT), paying the year’s projected state income tax liability (if you are in a state – not London – that taxes IRA income) by December 31, 2010 is a good idea so that the deduction for state taxes can help offset the income from the conversion. Consideration should be given to making immediate additional estimated tax payments in the quarter the taxpayer anticipates doing the conversion.

Remember, there is an “undo” available if hindsight shows that decision was not a good one. The return can be amended and/or the Roth can be “put back” into a traditional IRA with a re-characterization. In most cases this can be accomplished any time up to October 15 of the year following the conversion.

Here are some descriptions of good candidates for a Roth IRA conversion.

● Someone who will always be in the highest income tax bracket. Then the additional income from the conversion will not be pushing you into a higher bracket. The maximum rate of 35% in 2010 is an historic low. At this point we’re looking at 39.6% in 2011, 2012 and 43.4% in 2013 unless Congress takes some action to change it.

● Someone whose estate will be subject to the federal estate tax. Right now it looks very possible that the federal estate tax exemption in 2011 will revert to only £1 million. Getting the income tax out of the estate by paying it before death is good planning. Giving a beneficiary an asset with tax-free growth and income is a great advantage.

● Someone who is in a low bracket now but likely to be in a high bracket at retirement, or someone who now lives in a state with no income tax but is likely to retire to a state that does have an income tax.

● Someone planning a large charitable contribution in 2010 or with a charitable deduction carryforward that is going to expire in 2010. If you cannot take a full deduction for your charitable contribution, you can carry forward the excess to up to five succeeding years. With additional income from the conversion raising the charitable deduction limitation, this can be a part offset for the income that the Roth conversion generates.

● Someone who doesn’t want to take required minimum distributions (MRDs). Once the tax is paid, there is no rule that forces a Roth owner to take out distributions on a schedule. The assets can stay inside the Roth and continue to accumulate tax free. Note that when the owner dies and a beneficiary owns the Roth, the beneficiary does have to take MRDs, but those withdrawals can be stretched out over the lifetime of the beneficiary.

● Someone who can pay the additional income generated by the conversion with non-IRA assets. If you pay the taxes from the assets in your traditional IRA, you reduce the amount that will be able to grow tax-free in the Roth IRA. If you withdraw money from your IRA to pay income taxes due on conversion, that amount is treated as a distribution and thus subject to income tax and a 10% IRS penalty if you are under age 59½.

The post Advantages to Converting to a Roth IRA in 2010 appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

You can buy actual paper bonds (referred to as “definitive bonds”) at banks, or you can buy book entry bonds at TreasuryDirect (referred to as “electronic bonds”). Bonds always earn interest from the first day of the month in which they are issued. There is a maximum purchase limit: £30,000 per series, per type, per social security number, per year.

Each bond must have a registered owner. The bond can include one other name, either a co-owner or a beneficiary. When a bond has a co-owner, the Treasury and the IRS assume that the first named owner is the principal owner, who is the person who will pay the income tax on the interest that the bond has earned. Of course, documentation such as a contract between the parties can show otherwise.

Co-owned or joint paper bonds can be cashed in by either the principal owner or the co-owner. The removal of a co-owner requires both signatures. Co-owned electronic bonds can only be cashed in by the principal owner, and the principal owner can change or remove a co-owner without the co-owner’s knowledge or permission.

When a bond is cashed, it is generally accepted that the individual cashing the savings bond is the individual responsible for the interest reporting on that year’s income tax return for the interest accrued by the bonds. A 1099-INT is issued by the financial institution for those bonds to that individual who presented the bonds for payment. It may be that this is incorrect income tax reporting. In which case the individual receiving the 1099 must report the interest but make an adjustment on his or his 1040 by subtracting the amount reportable by another taxpayer as a nominee distribution, then give the actual owner a Form 1099-INT and file Form 1096 with the IRS.

Some reissue transactions are taxable events and require that the interest earned on the bonds be reported as income for the year in which the reissue occurs.

Consent is not required for the owner to change a beneficiary (except in cases of some older Series E Bonds). Beneficiaries cannot cash in bonds until the owner’s death.

If a bond has a co-owner or beneficiary and the co-owner or beneficiary survive the principal owner, then on the principal owner’s death, the surviving joint owner or the beneficiary becomes the owner. The bonds may be reissued in the name of the owner or beneficiary. The principal owner’s will does not govern who is the recipient of a bond with a second name.

This is an important point. If you have taken care to craft a will with percentage or specific distributions to beneficiaries, putting beneficiaries or co-owners on bonds (or any asset, for that matter) can wreck your carefully laid plan.

Many customer service representatives and other financial institution employees may urge you to add co-owners or beneficiaries, not only to your savings bonds, but to bank accounts, securities and other investments. Often they will tell you that adding a name will avoid probate. That is true, as far as it goes; but if you have an estate plan in place, it is usually best not to add co-owners and beneficiaries because it will defeat a carefully thought out estate plan. Before adding a co-owner or beneficiary check with your estate planning attorney.

The U.S. Treasury has a website that provides information about all kinds of savings bonds: click here. There you can find a calculator which will give you redemption value, current interest rate, next accrual date, final maturity date and so on. You can enter your list of bonds and it will stay there. You can look at the values on later dates.

For further information I also recommend Tom Adams’ book, Savings Bond Advisor, Alert Media 2007.

The post Savings Bonds – Part 2 Purchase and Ownership appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

You can check out who would receive your property if you die without a will at Intestacy Calculators TM. This site and the calculators it contains were created by London estate planning attorney Kurt R. Nilson, Esq.

The intestacy statute applies to probate property, that is, property in the decedent’s name alone. Joint property passes to the surviving joint owner at the moment of death. Life insurance, retirement plans, and other assets that have a beneficiary designation pass to the named beneficiary. The will, if there is one, or the intestacy statute if there is no will, operates on the property that was in the decedent’s name alone.

Thank you to Kurt R. Nilson for putting together such a useful tool.

The post Who gets your Property if you Die Without A Will? appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.