Tarpley & Underwood
Financial Advisors, LLC
Not surprisingly, a lot of people forget to update these forms as their life circumstances change, as they divorce and/or remarry. Ed Slott, a noted specialist in IRA distributions, has famously said that it is not uncommon for him to review beneficiary designations and find dead people listed as the inheritors. (This is not ideal from an estate planning perspective.)
A good financial planning professional can help you sort through these things, updating your beneficiary forms, helping you name contingent beneficiaries (who will receive your IRA if/when beneficiaries die), sorting through all the complicated issues surrounding Roth conversions and so forth. But lately, the most confusing part of the tax code has been the estate tax itself.
Why? If somebody had died last December 31, $3.5 million worth of his or her assets would pass to heirs free of federal estate taxes, and for amounts above that, the federal estate tax rate maxed out at 45%. If that same person had managed to survive until January 1, 2010, the U.S. Tax Code assesses ZERO federal estate taxes--none whatsoever--even if the deceased happens to be a multi-billionaire like Bill Gates or Warren Buffett.
It gets better. As things stand now, if that same famous multi-billionaire were to die in January of 2011 or any time thereafter, only $1 million of the ten-figure estate could be passed on estate-tax-free, and the tax rate is scheduled to go back up higher than it was last year, to a 55% maximum rate. Suddenly, a lot of people have to start thinking about estate taxes again. There is also a one-year change in how to calculate the capital gains tax on the sale of inherited assets, which will almost certainly affect many more people than the inheritance tax did (don't ask).
Congress is looking at ways to fix this situation, maybe retroactively. For now, we have to live with the complexity--which we should all be used to by now.
This article contains opinions which may not reflect the views of Tarpley & Underwood Financial Advisors, LLC and should not be construed as investment advice. Tarpley & Underwood Financial Advisors, LLC does not provide tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your financial professional for further information.
