A Limited Liability Company (LLC) is treated by the IRS as pass-through entity. Unlike a corporation, which must file its own, separate income tax return, the owners of an LLC (“members”) report the company’s profits or losses on their personal income tax returns. Here are the default rules: Single-Member LLC: An LLC that has only one member is treated by the IRS as if it were a sole proprietorship. So, there’s no separate LLC tax return, and the LLC as a business entity does not have to pay … [Read more...] about How is an LLC Taxed?
The Roth IRA as an Estate Planning Tool
If you have a Roth IRA, and you’re unlikely to need to tap into the account for retirement income, your IRA can serve as a vehicle for leaving an inheritance to your loved ones. Here’s how it works: Tax-Free Growth Contributions to a Roth IRA are made with after-tax dollars. Since you’ve already paid income tax on the money going into the account, the IRS allows that money to grow, tax-free – if you chose to withdraw money from your Roth during your retirement, you’d owe no income tax, even on … [Read more...] about The Roth IRA as an Estate Planning Tool
Traditional IRA Basics
A traditional IRA can be an excellent retirement savings tool, particularly if your earnings are too high for you to contribute to a Roth IRA or you don’t have the opportunity to invest in a 401(K). A traditional IRA allows your retirement contributions to grow tax-free, and in many circumstances your contributions to the account are tax deductible, too. There are some limits to the amount you can contribute to a traditional IRA in any given year. First, you can only contribute up to the … [Read more...] about Traditional IRA Basics
Roth IRA Basics
Unlike a traditional IRA, which offers tax-deferred growth for your retirement savings, a Roth IRA offers tax-free growth. Your contributions are not tax deductible, but after you reach age 59 ½ , the distributions you take from your Roth are not taxed – and this includes the money that initially went into the account as well as the interest earned on those funds. There are some pretty strict restrictions on who can contribute to a Roth IRA, and how much can be contributed each year. First, the … [Read more...] about Roth IRA Basics
Inheriting a Payable on Death Account? Here’s What to Expect
If a loved one has named you as beneficiary of a Payable on Death (POD) bank or investment account, you won’t have to wait until his or her estate is probated in order to receive the funds in that account. When the owner of the account passes away, you as beneficiary will simply need to present the owner’s death certificate to the appropriate financial institution and fill out any required forms. Once this is done, the funds in the account will be handed over to you. Since you, as … [Read more...] about Inheriting a Payable on Death Account? Here’s What to Expect
What Does the “Durable” in Durable Power of Attorney Mean?
Part of having a complete estate plan is thinking ahead about who should be in charge of your finances if you become mentally incapacitated at some point during your life. One of the essential documents in your incapacity plan is a Financial Power of Attorney, and many people have a Durable Financial Power of Attorney. What Makes it Durable? With a Durable Power of Attorney, you appoint an agent to manage your assets and make financial decisions for you, and not only does your agent have … [Read more...] about What Does the “Durable” in Durable Power of Attorney Mean?
Your Power of Attorney Might Not Work for Your Retirement Plan
When you establish a Financial Power of Attorney, it is with the intent of appointing a trusted person to take care of your finances in the event of your disability. But did you know that not all Powers of Attorney allow your agent access to your retirement plan? In order for your agent to have the authority to access and manage your 401(k), IRA, or other retirement plan, your Power of Attorney must contain specific language authorizing such access. If you have a do-it-yourself Power of … [Read more...] about Your Power of Attorney Might Not Work for Your Retirement Plan
Estate Planning Tip: Name Alternate Beneficiaries
One of your goals in making an estate plan is ensuring that your property makes its way into the hands of the right people when you pass away. To this end, you most likely have in mind the names of the people you’ll name as beneficiaries in your Will or Living Trust. However, for each beneficiary you name, you’ll also want to name an alternate beneficiary. Why Name Alternates? In case your primary beneficiary passes away before you do (and you haven’t had a chance to update your estate … [Read more...] about Estate Planning Tip: Name Alternate Beneficiaries
Sharing the Wealth With Mom and Dad
A lot of estate planning advice focuses on the steps you can take to protect and provide for your spouse and children, while minimizing your tax burden. But what about taking care of your mom and dad? Many adult children are in a better financial position than their elderly parents, and want to know what they can do to share the fruits of their labor. Here are just a few suggestions: Give Gifts: Under the current federal gift tax law, you can give up to $13,000 in money or property to an … [Read more...] about Sharing the Wealth With Mom and Dad
Is a Convenience Account Right for You?
In addition to a Durable Power of Attorney for Finances, one way to help ensure that your bills will be paid and your bank account effectively managed if you become mentally incapacitated is to establish a multiple party account without right of survivorship. Also called a “convenience account,” this is a type of bank account that lets you designate a trusted friend or loved one to have access to the account, without making him or her a co-owner of the account. This type of account is similar … [Read more...] about Is a Convenience Account Right for You?
