2009 Tax Year Relief For Minimum Distributions From Retirement Plans
IRAs and other qualified retirement plans often make up a large part of a person's personal wealth. Retirees are required under tax laws to take minimum distributions (RMDs) from these arrangements by April 1 of the calendar year after they turn 70 ½. The recent downturn in the economy has placed pressure on owners of these plans otherwise required to take RMDs or face penalty under tax rules that would have them depleting IRAs when they are at their lowest historic values.
The President is expected to sign the Worker, Retiree, and Employer Recovery Act approved by Congress on December 11, 2008. This law when signed will suspend penalties related to failure to distribute RMDs for the 2009 tax year. For owners who otherwise do not require IRA funds to live, this law will assist with giving their retirement assets a chance to "recuperate" without further "injury" of forced withdrawals due to tax laws.
While owners face the same issues related to yet to be taken RMDs for 2008, this new law will not offer relief as to the 2008 tax year, however, you should maintain contact with your advisers as relief could come from Washington in some other form to soften the impacts felt by distributing RMDs for 2008. It is expected that additional relief to shore up retirement programs may be coming in 2009 as well.
How can you cash in on today's low interest rates?
While we often think of low interest rates and the direct affect they can have on our borrowing and investment, the link between interest rates and the gifting for our family and others is not as common. It can literally pay BIG returns for the family. Low interest rates can offer exceptional opportunity for your estate plan when compared with a higher interest rate environment.
The tax laws have special rates to calculate the transfer tax, i.e., gift and estate tax, and its impact on various strategies designed to move value from your estate to those you desire instead of the "IRS".Simply put, as the prime and other rates have recently seen new lows, so too have rates used for estate planning. "Locking in" these low rates to an estate strategy may be an appropriate method for your family to get the IRS' help in enlarging the legacy you leave to your loved ones.Key rates for gifting strategies under the tax laws are at record lows.With certain strategies such as the Grantor Retained Annuity Trust or GRAT for short, low interest rates factor into big future gifts for heirs if the trust's actual return exceeds the low or "hurdle" rate.
Considering that today's "hurdle" rates are between 1 and 3 percent (one key rate is less than 1 percent), opportunity exists to keep the complete enjoyment of your principal while removing from your estate much compounded value earned above the hurdle rate and giving this appreciated value to your heirs with little to zero transfer tax. As a result, low interest rates offer unique opportunity in estate planning to greatly enhance your long-term giving to family. When it is considered that interest based plan's can be created with little to zero gift tax, today's low "hurdle" rates offer families rare incentive to maximize gifts without doing much more investment-wise than they probably would have done anyway.
Interest Rates and Estate Planning - Is there opportunity for you?
The IRS, through victory in the courts, has successfully shaped a change to the way families should plan with partnerships and similar entities.
Partnerships, particularly limited partnerships, and the corporate/partnership “hybrid”, Limited Liability Company (LLC), have long been useful operating structures for the “traditional” business venture. These entities have also been used to help families manage, protect and transfer wealth at a tax savings as part of an overall estate plan.
Due to several recent tax cases that highlight abusive use of these entities for estate planning, a new legal landscape exists. As a result of a series of victories by the IRS that challenge these entities in the family estate planning context, those who have followed the historic “rules”, may nonetheless now have legal obstacles to achieving the original goals of this part of their estate plan.
Periodic review and counsel is generally a good idea regardless of the original context or purpose for the entity’s existence. However, if these business structures form a part of a family’s estate plan, then recent rules highlight the importance to review the existing legal arrangements surrounding this part of the estate plan.
Contact our Florida estate plan, trust administration and probate law office about this expanded opportunity to keep existing business entities a viable part of the estate plan, and to review your situation for update or implementation of new and/or additional strategies.
