Can an IRA Be Used for Estate Planning Purposes?

Many people contribute into individual retirement accounts or IRAs, and the primary purpose for most people is the development of a retirement nest egg. An IRA can indeed be an essential part of your retirement plan, but under some circumstances, an IRA could be used for estate planning purposes. Let s look at the details. Roth Individual Retirement Accounts One type of individual retirement account is the Roth IRA. With this type of account, you make contributions after you pay taxes on the income. As a result, if and when you take distributions, they are not subject to taxation. You can begin to take penalty-free withdrawals when you are as young as 59.5 years of age. You are not required to take mandatory minimum withdrawals at any time when you have a Roth IRA. As a result, if you are in a financial position to do so, you could allow the account to grow tax-free throughout your life, and you could bequeath the account to a beneficiary. If the beneficiary is someone other than your

Estate Planning: What Do I Need to Know?

You may not take estate planning especially seriously if you are not aware of the facts. Some people figure that they can simply create a last will when they are old and gray, and that is the long and short of it. Indeed, studies are conducted periodically, and they consistently find that most people have not executed the appropriate estate planning documents. In this blog post, we will endeavor to provide some food for thought, and hopefully, you will recognize the need to take action if you are currently unprepared. Estate Taxes If you are in possession of a considerable store of resources, estate taxes could significantly impact the legacy that you want to leave behind to your loved ones. There is a federal estate tax, and it is applicable on asset transfers that exceed $5.43 million. The tax carries a 40 percent maximum rate. There are a number of states in the union that impose state-level estate taxes. We practice in Connecticut, and Connecticut is one of these states. The Conne

Is Every Estate Subject to the Estate Tax?

You may be concerned about taxes that can reduce the value of the estate that you are passing on to your loved ones. There is a federal estate tax, and in Connecticut, we have a state-level estate tax. The existence of these taxes is the bad news; the good news is that every estate is not subject to an estate tax. Federal Estate Tax Credit or Exclusion There is a federal estate tax credit or exclusion. This is the amount that you can transfer before the tax would be applied. During the rest of 2015, the federal estate tax exclusion is $5.43 million. The maximum rate that would be applied to the taxable portion of an estate on the federal level is 40 percent. If you are married, you should be aware of the fact that there is an unlimited marital deduction. You can transfer any amount of money and/or property to your spouse free of the federal estate tax. The tax-free transfers would be limited to the amount of the exclusion only when you are transferring assets to others. Connecticut St

What Is the Medicaid Community Spouse Resource Allowance?

Before we get into the Medicaid Community Spouse Resource Allowance, we should first explain why Medicaid can be relevant to retirees who were never financially needy. If you work throughout your life and pay FICA taxes, you earn retirement credits. You can gain up to four credits each year, and you will qualify for Medicare when you have at least 40 credits. The age of eligibility is 65 at the present time. You may assume that Medicare will pick up the tab if you ever need nursing home care. This may be a logical assumption, but in fact, Medicare does not pay for custodial care. Medicaid does pay for long-term care, and this is why it is relevant to many people who qualified for Medicare coverage. Medicaid Eligibility Because Medicaid is a need-based program, there is an upper asset limit of $2000 for an individual applicant. This is a very small number, but some things are not considered to be countable assets. Your home is not a countable asset, and this is a very big factor to tak

Will a Living Trust Help Me Avoid Estate Taxes?

You have to be aware of estate taxes when you are planning your estate as a financially successful individual. These taxes can significantly impact the future of your family if you are exposed. As a resident of the state of Connecticut, you have two different estate taxes that you may be forced to address. There is a federal estate tax that people all around the country must contend with, and in Connecticut, there is also a state-level estate tax. A certain amount can be transferred before estate taxes would kick in. This is called the credit or exclusion. For the rest of 2015, the federal estate tax exclusion is $5.43 million. Each year there are inflation adjustments, so you will see a slightly larger figure year-by-year if the current laws remain intact. The Connecticut state estate tax exclusion stands at $2 million at the present time. Because the state-level exclusion is considerably lower than the federal exclusion, you could potentially be exposed to the Connecticut tax even i

Elder Law FAQs: How Expensive Is Long-Term Care?

Elder law attorneys are sensitive to the needs of people who are concerned about the contingencies that they may face toward the end of their lives. There are many things to take into consideration, and you should act in a fully informed manner if you want to enter your senior years with peace of mind. One major elder law issue that everyone should be aware of is the matter of long-term care. It is natural to assume that Medicare will pay for all of your health care expenses once you obtain eligibility at the age of 65. Unfortunately, this is not entirely true. Medicare will not pay for long-term care. You could cross your fingers and hope that you never need long-term care, but if you are capable of handling all of your own affairs every day of your life, you will be in the minority. Seven out of every 10 seniors citizens will need help with their activities of daily living eventually according to a government agency. Long-Term Care Costs Unless you have extremely deep pockets, it is

How Can I Gain Estate Tax Efficiency?

There is no one-size-fits-all estate plan, because every situation is different. Steps that one person must take would not be necessary for the next. This comes into play when it comes to estate tax efficiency strategies. The federal estate tax is potentially applicable on large estates. In 2015, the amount of the federal estate tax exclusion is $5.43 million. You can transfer up to $5.43 million tax-free, but anything that you transfer that exceeds this amount may be subject to the estate tax. There is an unlimited marital deduction that allows you to transfer unlimited assets to your U.S. spouse tax-free, but you would be using a portion of your $5.43 million exclusion to leave resources tax-free to anyone else. The maximum rate of the federal estate tax is a rather hefty 40 percent. We practice law in the state of Connecticut. There are a number of states in the union that have state-level estate taxes, and Connecticut is among them. The Connecticut state estate tax exclusion is j

Are There Exceptions to the Five-Year Medicaid Look-Back?

The Medicaid program is a health insurance safety net for people with very limited financial resources. This program is jointly administered by the federal government along with each state government. Medicare is another government program, and it provides health care for senior citizens. If you are qualified for Medicare at the age of 65, you will not need Medicaid at first. Plus, you would not qualify if you have resources. In spite of these facts, Medicaid could become relevant to you at some point in time. This program does pay for long-term care, but Medicare does not pay for long-term living assistance. The majority of elders will someday need help with their activities of daily living, so this is a very pressing elder law issue. To qualify for Medicaid to pay for long-term care, your countable assets cannot exceed state mandated maximum amount. This would logically lead you to the understanding that you could give your assets to your loved ones to qualify for Medicaid if you ev

Why Would I Use a Trust Instead of a Will?

Everyone is aware of the fact that a will can be used as a way to state your final wishes when you are planning your estate. However, under certain circumstances, a trust of some kind can be a better choice. We will look at some of these scenarios in this blog post. Estate Tax Exposure If you maintain personal possession of your assets and arrange transfers through the creation of a last will, these resources would be part of your taxable estate. Yes, there are taxes on large asset transfers that can come into play after you pass away. We have a federal estate tax to contend with in all 50 states, and this tax carries a hefty 40 percent maximum rate. The exclusion is $5.43 million during the current calendar year. Anything that you are transferring that exceeds the amount of this exclusion is potentially subject to the federal death tax. There is a caveat to the above with regard to asset transfers between spouses. There is an unlimited marital deduction that allows for unlimited asse

Will Medicare Pay for Long-Term Care?

The matter of long-term care is one of the most pressing elder law issues of our day. We will look at long-term care expenses in this post, and we will also examine the limitations of the Medicare program. Medicare Many people are confident about their ability to handle medical expenses in the future because they will qualify for Medicare coverage. Medicare is a government health insurance program, and you pay into it when you are paying FICA taxes throughout your working career. You get four retirement credits for every $1200 that you earn in 2014. It is possible to accumulate as many as four retirement credits in a year. This is the maximum annual accrual, regardless of how much you earn. Once you have 40 credits, you will qualify for Medicare when you reach the age of 65. This program will be of great assistance, but it does not cover everything. There are out-of-pocket expenses to contend with for covered services, and there is one enormous hole in the coverage. Medicare does not