Take-Away: The federal Employee Retirement Income Security Act [ERISA] contains an extremely broad exemption provision that over-rides conflicting state laws. One exception to this principle that ERISA preempts conflicting state laws is a state’s slayer statute. Background: A forfeiture provision under a state’s probate laws is often called a slayer statute. Michigan’s version of a […]

Take-Away: Despite the SECURE Act’s 10-year distribution rule for inherited IRAs, the beneficiary of a decedent’s traditional IRA must take the decedent’ required minimum distribution (RMD) if it was not taken prior to the decedent’s death. That taxable distribution is not part of the SECURE Act’s 10-year distribution option for RMDs. Background: There is some […]

Take-Away: No one knows what tax reform will ultimately look like later this year, but that is not a good reason to ignore some planning steps that can be taken now to mitigate the increase in taxes that can be expected from that tax reform. All planning steps embrace the use-it-or-lose-it principle. Background: In March, […]

Take-Away: Roth IRA contributions and ‘backdoor’ Roth contributions can be made until May 17, 2021. Background: With the IRS’s recent extension in which to file 2020 Form 1040 income tax returns until May 17, 2021, that extension also pertains to Roth IRA contributions. Roth IRA Contributions: That means for those individuals who are under age […]

Take-Away: It is possible that a second reconciliation Bill could lead to a doubled capital gain tax for wealthy individuals, should Congress fail to embrace President Biden’s proposed increase in the corporate income tax rate from 21% to 28%. If that becomes a realistic outcome, then individuals who earn more than $1.0 million in income […]

Take-Away: While a recent IRS Publication on required minimum distribution (RMD) rules created major confusion, it also answered several lingering questions created by the SECURE Act. The IRS has informally admitted that for normal distributions to designated beneficaries, i.e. individuals, there is no requirement for an individual to take any distributions from an inherited retirement […]

Take-Away: When an IRA owner dies without naming a beneficiary, the  assets held in the IRA pass to the default beneficiary under the IRA custodial agreement, which is usually the deceased IRA owner’s estate. The IRS has issued several favorable private letter rulings this year that show how the decedent’s  IRA can be directly transferred […]

Take-Away: A self-settled special needs trust which preserves the beneficiary’s eligibility for Supplemental Security Income (SSI) generally cannot be terminated ‘early’ without jeopardizing the beneficiary’s SSI benefits and triggering a repayment of the previously received Medicaid benefits. A decanting of that special needs trust is viewed by the Social Security Administration (SSA) as a termination […]

Applicable Federal Interest Rates for March, 2021 Follow: Short-term rate (0 up to 3 years):                   0.11% Mid-term rate   (3 up to 9 years):                    0.62% Long-term rate  (9 years and longer)              1.60% if interest is paid monthly;  1.61% if interest is paid quarterly;  and 1.62% if interest is paid annually The IRC 7520 rate that is […]

Take-Away: In January, the Tax Court held that the ten percent (10%) obligation that is assessed when a distribution is taken from a retirement account by the owner under the age 59 ½ is not a penalty, nor an addition to tax, nor an additional amount. Background: For that last 25 or so years I […]