The lead article of our newsletter often involves a personal story of interest by one of our attorneys or staff. However, this month we feel compelled to address a more serious issue, one that we see adversely affecting our clients and their loved ones on almost a daily basis - - costly IRA mistakes.
Although we, of course, do our best to properly integrate your IRA with your overall estate plan, we continually find IRA mistakes being made that are outside the scope of what we do and control as your estate planners.
Here are just a few of the kinds of mistakes we are spotting (check if any of these apply to you):
You pay more taxes on your IRA distributions than necessary because you're not aware of the available offsetting tax deductions
You haven't been shown how to reduce or even eliminate your taxable required minimum distributions (that you must take after reaching age 70 ½)
You don't realize what your beneficiaries will really do with your IRAs after you pass away (most likely they'll cash them out quickly, which may jeopardize their own retirement; this is why you may consider getting our IRA Inheritance Trust®)
You don't know exactly which beneficiaries your IRA custodian shows on its records (and if the beneficiaries are incorrect, your IRA may pass differently than intended under your estate plan!)
We don't have the space here to cover in detail all the IRA mistakes we frequently see, but we can offer you some immediate help to at least avoid the above biggest mistakes.
If you have IRAs that total in excess of $100,000 (including your spouse's and any amounts you may roll over someday from a 401 (k) or other employer plan), give us a call and request a free consultation with one of our affiliated financial advisors at Pence Wealth Management (at our Torrance office).
We want to be sure you take proper care of your IRAs!
Reverse Mortgages Can Pose Problems for Heirs
Reverse mortgages can be a big help to seniors needing extra cash, but they can become a nightmare for their heirs. Heirs who don't know their rights may be faced with large bills or threats of losing the house. Fortunately, there are some protections for heirs.
Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower, and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house, or permanently moves out.
When the homeowner dies, the house passes to the homeowner's heirs, and the heirs have the following options:
Pay off the loan
Buy the house from the lender at 95 percent of its value
Sell the house and use the proceeds to pay off the loan
Deed the house to the lender
Do nothing and let the lender foreclose
If the value of the house is less than the amount of the loan, the bank cannot go after the estate or the heirs for the remainder of the money. If the value of the house exceeds the loan, heirs can sell the house, pay off the loan, and keep the remaining amount.
The heirs have 30 days to decide what they want to do with the house and up to six months to arrange financing. Unfortunately, according to
The New York Times, many lenders aren't notifying heirs about their rights and are instead immediately beginning foreclosure proceedings or bogging heirs down in paperwork. Many heirs aren't aware that if they want to keep the house, they can either pay off the loan or buy the house for 95 percent of the appraised value. This can be very beneficial to the heir if the value of the house has gone down significantly since the loan was purchased.
Beat egg yolks, 4 tablespoons white sugar and vanilla extract in a mixing bowl until thick and creamy.
Pour cream into a saucepan and stir over low heat until it almost comes to boil. Remove the cream from heat immediately. Stir cream into the egg yolk mixture; beat until combined.
Pour cream mixture into the top pan of a double boiler. Stir over simmering water until mixture lightly coats the back of a spoon, about 3 minutes. Remove mixture from heat immediately and pour into a shallow heat-proof dish.
Bake in preheated oven for 30 minutes. Remove from oven and cool to room temperature. Refrigerate for at least 1 hour or overnight.
Preheat oven to broil.
In a small bowl combine remaining 2 tablespoons white sugar and brown sugar. Sift this mixture evenly over custard. Place dish under broiler until sugar melts, about 2 minutes. Watch carefully so as not to burn.
Remove from heat and allow to cool. Refrigerate until custard is set again.
Here is a very special THANK YOU to all of our clients who have referred family and friends, or forwarded our newsletter to them! If you are part of a group or club and you would be interested in having us speak to the members on important estate planning topics of interest, please contact us at firstname.lastname@example.org.
Quote of the Month
(for Father's Day!)
Being a great father is like shaving. No matter how good you shaved today, you have to do it again tomorrow.