Here's the right way to handle a client’s inheritance: Tax Strategy Scan
Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Here's the right way to handle a client’s inheritance
Clients who received a big inheritance are advised to defer any major decisions on how they will spend the windfall, according to this article from CNBC. They should first account for any obligations or costs, such as taxes. "In most cases, money has limits. There's just so much to go around,” according to one certified financial planner. “It's about prioritizing, what's most important to you right now."
How to roll over an IRA into a qualified plan
When rolling traditional IRA assets into a qualified plan, clients can only transfer pre-tax funds, according to Morningstar. When doing a rollover, clients should get professional help, ensure that the qualified plan accepts rollovers and separate the pre-tax from after-tax money in their IRA. Clients should also avoid withholding 10% of their federal income taxes, ensure the checks representing the rollover do not include after-tax money and transfer the remaining balance in their IRA to a Roth account.
How to divvy up your client’s wealth when they don’t agree with a child's life choices
Nobody knows what the tax rates will be three decades from now, so taxpayers are advised to hedge their bets when it comes to retirement investing, according to this Los Angeles Times article. Clients may want to direct most of their savings to a pretax 401(k) plan but also contribute to a Roth account, which allows tax- and penalty-free withdrawals — even before retirement — giving them some flexibility and greater control over their savings.
How losing a spouse could raise a survivor's taxes 416%
The death of a spouse could spike the surviving spouse's tax liability by as much as 416%, according to this article from Kiplinger. Surviving spouses can avoid the hefty increase by opting for tax-free assets. For example, a surviving spouse may convert the traditional IRA assets into Roth and use the deceased spouse's life insurance to cover taxes triggered by the conversion.
These planning strategies can prevent beneficiaries from biting off too much — or too little.August 19
The right strategy can save clients thousands of dollars, although the options are complicated.July 24
7 states with the highest income tax
Findings from WalletHub show that New York, Oregon and Maryland lead the states with the highest individual income tax burden, which takes into account both income taxes and property taxes, USA Today reports. Tax burdens are also considerable in Minnesota, California, Massachusetts and Connecticut, where rates are higher than 3%, according to the report.