by Bill Griffith Bill Griffith No Comments

Required Minimum Distribution (RMD) After Death

What is the required minimum distribution (RMD) that must be taken if an IRA owner dies on or after the required beginning date?

For the purposes of this article, we will be discussing traditional IRAs.  More specifically, we will be discussing the required minimum distribution (RMD) that must be taken for the year that an IRA owner dies.

If your loved one passed away in 2019, you will need to know what the options are when inheriting an IRA.

Required Beginning Date

First, what is the required beginning date?  Any discussion about retirement topics or IRAs typically includes a reference to the required beginning date. 

The required beginning date is simply the deadline for taking the first required minimum distribution (RMD).  The deadline is April 1 of the year following the year that you become age 70 ½.

For example, an IRA owner who turned 70 in February 2017 was 70 ½ in 2017.  The required beginning date will be April 1, 2018.  An IRA owner who turned 70 in November 2017 did not reach 70 ½ until 2018.  The required beginning date was April 1, 2019.

If IRA Owner Dies on or After the Required Beginning Date

An IRA owner who dies after the required beginning date should have been taking RMDs.  If not, he or she would have been subject to a 50% penalty tax on the amount not withdrawn.

A required minimum distribution must also be taken for the year of death just as if the IRA owner was still living.  The questions are, how is the RMD calculated and who must take it?

Calculating the RMD

The RMD for the year of death is calculated the same as if the IRA owner was still living.  In most cases, the Uniform Lifetime Table is used unless the beneficiary is a spouse and more than 10 years younger than the IRA owner.

For example, the RMD for a person who dies in 2019 at the age of 72 would be calculated by using a distribution period of 25.6.   

Who Takes the Required Minimum Distribution?

It is very important to know who must take the RMD for the year of death.  This depends on whether the IRA owner already took the RMD in the year of his or her death.  If the IRA owner did not take the RMD in the year of death, then the beneficiary must take it. 

For example, if your spouse died in 2019 before taking the RMD, then you will take the RMD if you are the named beneficiary.

If you are the named beneficiary of your parent’s IRA, then you must take the RMD for the year of death.

IRA Rules Can Be Confusing

There are many rules regarding IRAs. Sometimes, the rules and deadlines can be confusing. 

Hopefully, you now have a better understanding of the rule regarding the required minimum distribution (RMD) that must be taken if an IRA owner dies on or after the required beginning date.

As always, do not sign any beneficiary claim forms until you fully understand the company’s contractual and/or IRS tax ramifications.  A mistake could trigger a huge tax penalty. And make sure that you contact your advisor (estate attorney, CPA, CFP®) for professional advice.

by Bill Griffith Bill Griffith No Comments

Finding Unclaimed Money and Property

Finding unclaimed money and property can be daunting and very time consuming. Save yourself time and potential losses in value by knowing when escheatment occurs.

According to the state treasurer, one in ten Pennsylvanians has unclaimed property that can be applied for. While more and more residents are becoming aware of the process of searching for unclaimed property, the process of finding unclaimed money and property can be daunting and very time consuming.

Unclaimed Property Search

Since we regularly help people with claims paperwork, we know what the process entails.  The claims process begins with a search, requesting a claim form, and furnishing documents such as death certificates, affidavits, proof of address, POA documents, and other evidentiary documents requested by the Bureau of Unclaimed Property.

The department then reviews claims documents, which can take months or even years to complete.

Property Escheated to the State

Though it is possible to re-claim property that has been escheated (property deemed lost, abandoned or unclaimed and then turned over) to the state, it is important to try to understand when escheatment occurs to avoid having to go through this process in the first place.  This saves you not only time, but also from potential losses in value that might occur as a result of escheatment.

Holders of property, such as financial institutions, are required to send due diligence notifications to the owners of any property before escheating it.

Holders of property subject to escheatment are bound by the state’s rules regarding dormancy periods and must turn over any “abandoned” property to the state after a specified period.  In Pennsylvania, the dormancy period is most often 3 years, but can vary based on the type of property (e.g. 2 years for wages or commissions, 7 years for money orders).

For example, suppose you have stock certificates in a safe.  If you move to another house and forget to notify your stock transfer agent, it is possible that your stock transfer agent might lose contact with you.  If the stocks (which are generally sold immediately, often at a loss) are turned over to the state after the dormancy period, you would have to go through the process of filing a claim for the value of the stocks when they were sold. This is a waste of time and could cost you any gains that you may have earned had the stocks not been escheated.

Abandoned Property

The same scenario can play out if a financial institution such as a bank has not contacted you for several years.  If they never receive updated contact information and mail is being returned to them, an account may be deemed lost, or a safe-deposit box considered abandoned, at which point the contents would be escheated to the state. This scenario is particularly concerning with priceless tangible property kept in a safe deposit box, which the state will liquidate after three years, rendering it impossible to recover.

Keep Your Estate Planning Up to Date

It is important as a part of your estate planning process to keep a list of all financial institutions with whom you do business, including banks, brokers, transfer agents and insurance companies. Review this list and update it regularly (at least once per year) and include it with your other important estate planning documents such as a living trust or a will so that your family members will know where to locate it when it is needed.

When compiling this list, take the time to reach out to the institutions that you don’t deal with regularly to make sure that they have your current address and telephone number. It is wise to note the last time that you’ve reached out to each institution, so that you can remember to touch base every year or so.

Protect Your Assets From Being Escheated

Remember that while your financial institutions are required to perform due diligence efforts to contact you before escheatment occurs, they are still required by law to report abandoned property. 

Keeping your accounts active by updating your contact information, making a transaction, logging in to online banking services, or even calling customer service, will help you protect your assets and prevent future headaches and loss that can occur when assets are turned over to the state.

Finding unclaimed money and property can be daunting and very time consuming. Save yourself time now and potential losses in the future by knowing when escheatment occurs and how to prevent your property from being deemed lost, abandoned or unclaimed and then turned over to the state.

by Bill Griffith Bill Griffith No Comments

Reviewing Your Estate Plan

Reviewing your estate plan periodically will ensure that your Revocable Living Trust and other estate planning documents are properly aligned with your most important goals.

Are you confident that your estate plan is designed properly? Do you know how your estate will pass to your beneficiaries?

If not, you can gain a better understanding of how your estate plan is designed and the level of stress that your loved ones may incur if something where to happen to you.

Determine the level of stress on your loved ones

One of the main goals of estate planning, for many people, is to minimize the burden of estate settlement.  One way of minimizing the burden of estate settlement is by avoiding probate.  One way of avoiding probate is with a living trust.

How Does a Living Trust Avoid Probate?

After a living trust is created for our clients, we help them transfer the title of their assets to their trust.  Although the title of their assets has been transferred to their trust, they still control the living trust during their lifetime.  As the Trustee, they still manage their assets for their own benefit during their lifetime.  They can still use their assets just as they did before they set up their trust.

Since their trust owns the assets, and not them personally, their estate does not have to go through the probate process when they die.

Funding a Living Trust

Transferring the title of assets to a living trust is really a simple process.  It is called funding the trust.  To minimize the burden of estate settlement by avoiding the probate process, the Revocable Living Trust must be funded properly.

By reviewing your estate plan periodically, you can be sure that your living trust is properly funded upfront to avoid the unintentional expense of probate.

Changes in Personal Circumstances

Another reason for reviewing your estate plan is to account for changing laws and changes in personal circumstances.

Do Your Powers of Attorney Documents Need Updated?

Every so often, the state will change the laws for the Durable Power of Attorney.  In addition to changing laws, some financial institutions may not accept a POA that was drafted many years ago.

The cost for updating powers of attorney and other ancillary estate planning documents is minimal.

It is highly recommended that people review their estate plan at least once each year to make sure that their estate plan remains current and to ensure that any new assets were properly titled in the name of the trust.

An even better and easier way to keep on top or your estate plan is by using our interactive estate planning program. You’ll be able to keep your information up to date and allow other authorized users, such as your child, to view your Pre-Paid Funeral Expenses, your legal and other documents right online.

To login for the first time to begin an estate plan, simply click My Estate Plan at the top of the screen. We’ll send you a separate email with a link to complete an interactive questionnaire.

by Bill Griffith Bill Griffith No Comments

Living Trust Can Avoid Probate

A living trust can avoid probate and ensure that your assets will pass to the beneficiaries you choose, and in the manner that you want.

A trust can be a fundamental part of planning for the future.  Trusts can help people avoid probate, unnecessary taxes, put their wealth to use in exactly the way they wish, accumulate assets for retirement or their beneficiaries, and much more.

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