Avoid the 50% RMD Penalty

With December 31 right around the corner, now is the time to start thinking about those required minimum distributions – or RMDs. In simple terms, an RMD is the minimum amount that must be taken out of your retirement account each year once you reach age 70.5 or the year after you have inherited an IRA account. If you fail to do this in the correct amount by year-end, you could face a penalty of up to 50% of the total distribution amount. Don’t wait to the last minute to get your RMD squared away. 


For professional assistance with your RMD calculations and distribution requirements, contactour office at 877-714-2362 to schedule a time to discuss.


The Two Gifts of the Tax Code

The Two Gifts of the Tax Code“The two gifts of the tax code are the Roth conversion and life insurance.” -Ed Slott, CPA

I first heard Ed Slott speak that quote at an IRA workshop on a May day in Washington, DC. As I boarded my train home, I reflected on how beautiful the cherry blossoms looked but also on how the Roth conversion and life insurance could change lives.

I had been a licensed financial advisor since 1991 and the world of IRAs was a growing part of my practice. I began realizing that more clients were retiring and most did not have a pension. They had a 401k or 403b and an IRA. In fact, clients that had been at other companies either kept the 401k at the old company, moved it into the new company’s plan, or some moved it into an IRA. The main advantage of moving their employer plan to an IRA, clients told me, was for better control of investment options. The tax deferral on all these accounts remained until the individual hit 70 1/2 years of age. I had a bunch of clients that had already hit the number and saw their taxes increase because they had to take this required minimum distribution. In the first year, the RMD (Required Minimum Distribution) is about 4% of the prior year’s December 31st value.  As the clients got older that percentage really jumped, plus if the market increased so did the account values and their taxes.

In 20 plus years of tax seasons, I had always noticed this pattern of taxation increasing yet I did not see any proactivity or reaction to help clients address this dilemma (especially from the professional tax advising community.)

I believe every American has an obligation to pay taxes once. Paying taxes twice is your fault.

Everyone with an IRA and 401k, 403b, 457, SEP that has not acted on the Roth conversion option is living a lie.

When people with these plans receive a statement, they see the value go up or down. The growth of these investments is like seeing the value of my residence increase but if I were to sell that, my profit would be eroded by having to pay off an increasing mortgage that is held by Uncle Sam (who is not even your real uncle). These tax-deferred accounts are like having a partner that does nothing. So, if I set aside this pretax money, make wise investment decisions, doubled or triple my original contribution, when I pull any of it out, I will have to give a big chunk of it to this silent partner, the IRS.

“One of the Gifts of the Tax Code” as Slott explained is the Roth IRA conversion because you pay taxes now to allow the same money to grow tax-free. The most common way to get rid of a partner is to pay them off.

I sat in the crowd mesmerized, writing down, as instructed by this CPA, the “knowledge” I learned on the left side of a lined notebook and the “relationships” that could benefit from this newly acquired knowledge across the notebook on the right side. I wrote down “Roth conversion” on the left side of my pad and I wrote down 17 names of clients, prospects and centers of influence with whom I needed to share this information on the right side.

At the top of the list was a 64 year old client from Albany.  This semi-retired electrician had listened to me regarding everything dealing with asset allocation and estate planning so far but this tax planning strategy was really special. Ironically, we had just added life insurance to address the estate tax federally at the time, so we already had one of the two gifts of the tax code.

Albany Al converted a big amount in 2010. He continued to convert his SEP-IRA over the next 4 years until he passed away last year. His two sons inherited the father’s assets including the annual tax liability on the remaining IRA.

The sons also split up a Roth IRA which will also need to be distributed annually but completely tax-free. Each of them also received tax-free checks from the father’s life insurance trust.

In fact, both daughters were going to be millionaires but because of the life insurance they became multi-millionaires.

I know that Ed and I played a part in helping this family make a wise financial decision for the future. I continue to attend Ed’s workshops throughout the country and I remain a current member of the Master Elite IRA Advisor Group to keep acquiring “KNOWLEDGE.”

“Without knowledge action is useless and knowledge without action is futile.” -Abu Bakr


Aid and Attendance Benefit for Qualified Veterans and their Surviving Spouses

What is the Aid and Attendance Benefit?

The Aid and Attendance Benefit, also known as the Pension Benefit or Veteran’s Benefit, is a tax-free monthly pension to assist wartime veterans and their surviving spouses who require the assistance of another person with aspects of daily living and who meet certain financial criteria.

The benefit comes in as cash so it can be spent on home care, assisted living, home health, other out of pocket medical expenses but it can also be spent on cigarettes and groceries. It does not have to be spent on any specific thing. The deal with the VA benefit is in order to get the benefit, they must spend part of their income on medical expenses.


Veterans must have served at least one day during a period of war, at least 90 days in total and they were other than dishonorably discharged. It doesn’t matter if veterans were stationed in Knoxville, Tennessee with the U.S. Coast Guard and never set foot on a boat. Veterans did NOT have to go overseas, enter combat or be wounded in order to receive this benefit.

Date Ranges for War Periods

World War I – April 6, 1917 through November 11, 1918
If the veteran served the United States military in Russia, the period is April 6, 1917 through April 1, 1920.

Military service after November 11, 1918 and before July 2, 1921 is recognized as World War I service IF the veteran served in the active military, naval, or air service from April 5, 1917 through November 12, 1918.

World War II – December 7, 1941, through December 31, 1946
World War II service is also recognized from December 23, 1946 through July 26, 1947 IF the veteran was in service on December 31, 1946.

Korean conflict – June 27, 1950, through January 31, 1955

Vietnam era – February 28, 1961, through May 7, 1975
These date ranges only consider if the veteran served in the Republic of Vietnam during that period. In all other circumstances, the period beginning on August 5, 1964, and ending on May 7, 1975.

Persian Gulf War – August 2, 1990, through Present
The date to be prescribed by Presidential proclamation or law but hasn’t been declared yet.


So to be the surviving spouse of a veteran, she had to have been married to someone who met those veteran criteria. She have to have been married to him at the time of his death. If she wasn’t married to him at the time of his death because she got divorced, then she’s considered an ex-wife, not a surviving spouse and not eligible for this benefit.images-12

The maximum award adjusts every year due to inflation. This award does go up with Social Security. For 2015, here are the current amounts:


Are Your Estate Documents In Order?

One area that is particularly critical to get right is estate preparation and the protection of your loved ones from the unexpected. Proper estate preparation is an act of love and responsibility to those you care about.


Estate Preparation Questions You Should Consider

  • Have you discussed your wishes with your spouse and loved ones?
  • Do you have an updated Will?
  • Have you executed a Living Will and healthcare proxy to protect your wishes in the event of incapacity?
  • Have you named guardians for your children?
  • Have you created a Trust and titled your assets in the name of the Trust?
  • Were your estate plans constructed to minimize tax consequences?
  • Have you reviewed your primary and secondary beneficiaries to make sure they reflect your priorities?

These questions are not exhaustive and are only designed to act as a starting point for your preparations. If you’re not sure about any of these issues, it may be time to request a legal and financial review.


Why is estate preparation so critical?


  • It documents your wishes and helps ensure that they are carried out when you are no longer able to look after your affairs.
  • It helps protect the financial stability of your loved ones and support your life priorities.
  • It helps minimize the taxes, expenses, and legal hassle involved with transferring assets to heirs.


Do I really need estate preparation if I have beneficiaries on my accounts?


Beneficiary provisions are a valuable tool for reducing the expense and time associated with transferring wealth; however, they do not replace proper estate preparation. I believe that the process of preparing your estate is critical to protecting your family and future financial affairs. I have also found that estate preparations offer an opportunity to explore your life priorities and discuss your thoughts with your loved ones.


Many Americans put off estate preparation because they view it as morbid or depressing. I prefer to treat it as preparing for life and protecting your family from the unexpected. Though you cannot control the future, these preparations help you focus on what you can control and empower you to care for your loved ones long after you’re gone.


If you have worked with an attorney to develop your estate plans, it’s still a good idea to regularly review your documents to make sure that they still reflect your wishes. Letting your documents go out of date can create legal problems or expensive tax bills for your heirs. To help ensure that my clients have professional recommendations for their circumstances, I partner with legal professionals who specialize in helping clients create a personalized estate blueprint. Please let me know if I can provide an introduction.


In this letter, I’ve asked some questions that I hope will help you think about your priorities and prompt a discussion with your loved ones. Please feel free to share this information with your friends and family; everyone deserves the benefit of professional recommendations and the confidence of knowing that their future wishes are protected. If you would like to review your current estate provisions or need help finding an attorney, please call my office at 877-714-2362

Avoid the 50% Required Minimum Distribution (RMD) Penalty

With December 31 right around the corner, now is the time to start thinking about those required minimum distributions – or RMDs. In simple terms, an RMD is the minimum amount that must be taken out of your retirement account each year once you reach age 70.5 or the year after you have inherited an IRA account. If you fail to do this in the correct amount by year-end, you could face a penalty of up to 50% of the total distribution amount. Don’t wait to the last minute to get your RMD squared away. Click here for “10 Questions to Ask Before Year-End!” For professional assistance with your RMD calculations and distribution requirements, click here to schedule a complimentary consultation or contact our office at (877-714-2362)img_newYear_sign_540x360

Download: Beneficiary Form Checklist

Planning for the inevitable might not be the most desirable part of retirement planning, but it is certainly an important step to properly take care of your loved ones once you are gone. Updated beneficiary forms override any other legal documents in estate planning and are essential to ensure that your hard-earned assets will be distributed to the right people. Knowing where you beneficiary forms are kept, naming contingent beneficiaries and determining the percentage each beneficiary will receive are just a few steps to ensure that your assets will be distributed properly.

For professional assistance to review your beneficiary forms or to discuss essential estate planning considerations for your retirement, contact our office at 877-714-2362 to schedule a time for a visit.

To Check Whether your beneficiary forms are up to date Click here for : Beneficiary Form Checklist

Roth IRA vs Roth 401k

A Roth IRA and Roth 401(k) sound similar, right? Both are great tools to create tax- free retirement income. But do you know what separates these two types of tax-free retirement accounts? Which one requires an earned income and has contribution limits? Which one passes income tax-free to beneficiaries? And which one has required minimum distributions that kick in at age 70.5?

To get these answers and more and to find out which account type is right for you,

download our Roth IRA vs. Roth 401(k) comparison guide  click  this link:   Roth IRA vs Roth 401k

5 Estate-Planning Documents Everyone Should Have

5 Essential Estate-Planning Documents Everyone Should Have 1Most Americans do not have a will or any other estate documents. If they do, the documents aren’t likely up to date. Proper estate-planning documents can save you and your family headaches, time and money. There’s no time like the present to start protecting your family and your assets by making sure all your planning ducks are in a row.

Here are five estate-planning documents everyone needs:

  1. A will – This ensures qualifying assets are distributed according to your wishes upon your death. A will also names a guardian for minor children. Sitting down and completing a will is the best way to guarantee that your wishes will be fulfilled and avoid leaving big decisions up to the courts.
  2. Durable power of attorney for asset management – This names a family member or friend to make financial decisions for you if you’re incapacitated or unable to act. This is a serious decision because, unlike an executor, this could be a continuing role in which the person you choose is managing your finances. Completing this form can be very important in avoiding conservatorship should you become incapacitated.
  3. Health-care proxy – This authorizes a family member or friend to make medical decisions if you are incapacitated. Make sure your doctor and hospital have an up-to-date copy.
  4. Living will – Also known as an advanced health-care directive, this states your health-care and end-of-life wishes so the person making decisions knows what you want. Make sure your doctor and hospital also have this document. Your advanced health-care directive includes such things as whether you want to be resuscitated if your heartbeat or breathing stops, or whether you want5 Essential Estate-Planning Documents Everyone Should Have 2 to be kept alive through artificial respiration or feeding.
  5. Medical release – This is often called a HIPAA release (Health Insurance Portability and Accountability Act). This document lets a family member or friend access your medical records to monitor what is going on and make decisions.

Protecting the financial well being of your loved ones is of paramount importance. WFP Tax Partners can help with your estate-planning needs. Call 877-714-2362 or contact us online to request an appointment today.

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