Will You Take Advantage of New Roth Rollover Rules?
January 17, 2010
January of 2010 has brought with it a lot of change that is keeping financial and estate planners on their toes. In addition to the repeal of the estate tax (discussed in a previous post), we have been presented with new Roth IRA rollover rules that took effect January 1st, and which now allow anybody, regardless of income, to convert their traditional IRA to a Roth IRA. The question now is: Is it worth it?
The answer to that question will be different for everybody, because the amount that will be taxed upon conversion depends entirely on the kind of contributions you have made to your traditional IRA in the past. If you have made more non-deductible contributions than tax-deductible contributions to your traditional IRA you will almost definitely want to take advantage of the conversion opportunity. If you have made fewer non-deductible contributions you may be looking at a higher tax bill. However, the fact that the tax bill can be spread out over two years (but only if the conversion is made this year) should give even those who have made mainly tax-deductible contributions reason to consider the switch.
If you think you may want to make the switch, talk to your advisor. Your financial specialist can tell you the pros and cons of switching based on your personal IRA history. The nice part is that if you do decide to take advantage of the new rules, the decision doesn’t have to be permanent. Those who convert their traditional IRA to a Roth IRA in 2010 will have until October 15, 2011 to change their minds and switch the account back to a traditional IRA.
The Dangers of Neglecting Your Estate Plan
October 24, 2009
Many people think that there’s no need to update your estate plan documents if none of your beneficiaries or fiduciaries have changed, but that’s exactly the kind of thinking that can lead to disaster. Estate planning documents are based not only on your own wishes, but also on federal and state tax laws. When we draft your documents we take into account a number of different factors, with the goal of providing you the best possible result and an estate plan that we expect will work like a well-oiled machine when the time comes; but it also means that your estate plan needs periodic review, just as your car needs an occasional tune-up.
Our point is perfectly illustrated by an article in the Wall Street Journal entitled Is There A Trap Lurking In The Language of Your Will? As this article points out, new tax laws—and your own changing financial situation—could mean that language originally meant to apportion assets in the most efficient manner could now result in leaving your surviving spouse without full control of any assets at all.
The only way to ensure that this does not happen is to have your estate plan documents reviewed every few years. Luckily, depending on the extent of the update, the cost of a simple review and update is much less than the initial cost of creation. But the longer you wait between reviews, the more likely it is that the changes needed to bring your plan up to date will be extensive—and thus more expensive.
Don’t let too much time pass between reviews of your plan. For more on this subject, see “Review Your Living Trust–Older Ones May Need Revision”.
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