Passing down a Roth IRA can seem like a good idea, but it doesn’t always make the most sense. Before converting a traditional IRA into a Roth IRA to benefit your heirs, you should consider the tax consequences. Earnings in a traditional IRA generally are not taxed until they are distributed to you. At age 70 1/2 you have to start taking distributions from a traditional IRA. By contrast, contributions to a Roth IRA are taxed,
Assisted living facilities are a housing option for people who can still live independently but who need some help. Costs for these facilities can range from $2,000 to more than $6,000 a month, depending on location. Medicare won’t pay for this type of care, but Medicaid might. Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents. Unlike with nursing home stays, there is no requirement that Medicaid pay for
Giving your house to your child or children can have tax consequences, but there are ways to accomplish this tax-free. The best method to use will depend on your individual circumstances and needs. Leave the house in your will The simplest way to give your house to your children is to leave it to them in your will. In 2017, as long as the total amount of your estate is under $5.49 million it will not
A recent IRS notice confirms that an account transcript issued by the IRS qualifies as a substitute for an estate tax closing letter, as long as the transcript includes the proper transaction code. An estate tax closing letter indicates that the IRS has accepted an estate tax return and that the estate’s federal tax liabilities have been satisfied. Once the letter has been received, it makes it clear to the executor of the estate that it
It’s a big year for the first set of baby boomers: They’re turning 70 1/2. And that means getting prepared for their first mandatory distributions from tax-sheltered retirement accounts. The first thing to keep in mind is that the amount of your required annual withdrawal is based on the assets in the account as of the prior December 31. For a taxpayer with multiple 401(k) plans, he or she must take a proportional distribution from each
Buried in a new federal law is a tiny change that will now allow individuals to set up their own special needs trusts. The sum total of the change is two words — “the individual” — intended to correct a more than 20-year-old error. The change is called the Special Needs Trust Fairness Act. Authorized under the Omnibus Budget Reconciliation Act of 1993, special needs trusts protect assets and allow an individual to maintain eligibility for
Imagine a situation where a loved one dies and there is a contest over the validity of the will. The question arises: What was the decedent’s mental state in drafting the will? A typical, knee jerk answer is that the decedent had a perfectly clear state of mind. However, testamentary capacity doesn’t require such a high level of clarity in communication and comprehension. Further, overstating a decedent’s capacity might actually lead a trier of fact to
With proposals to repeal the federal estate tax and the generation-skipping transfer (GST) tax on the table, the new administration may be opening up some rare estate planning options. Under President Donald Trump’s proposal, the current step-up in basis for income tax purposes on assets owned at death would be limited to $10 million of assets. The intention, according to the proposal, is to exempt small businesses and family farms. It’s likely that assets exceeding $10
The IRS announced that an estimated one million taxpayers who did not file an income tax return in 2013 could claim their share of $1 billion in unclaimed refunds for the 2013 tax year. The law gives most taxpayers a three-year time period to claim a tax refund. After that time, the money belongs to the U.S. Treasury. So if you did not file in 2013, to be safe, send your 2013 tax return via certified
Spring fever often influences homeowners to update and remodel. Maybe you’re considering a new project, too. You may need to replace your deck or remodel your kitchen. If you have a remodeling project coming up, you should understand the tax consequences. If your project qualifies as an improvement to your home, you’ll enjoy some tax benefits. But if the project is a repair, there’s generally no tax benefit. Unfortunately, it’s not always easy to tell the
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