Estate panning tips with clients under coronavirus quarantine: Tax Strategy Scan

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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

How to get your clients’ estate plans done while under coronavirus quarantine
A revocable living trust is an estate planning tool that will enable clients to avoid probate, reduce estate tax and qualify for long-term care benefits, an expert writes in Kiplinger. Existing law requires clients to sign the document in the presence of the notary, which could be difficult for seniors who need to be under quarantine to avoid getting sick of the coronavirus. To go around this requirement, the trust may be signed without a notary's acknowledgement if both clients and the attorney prepare separate affidavits citing the emergency conditions as a primary reason that prevents them from having the trust signed without the presence of the notary, according to the article.

10 sources of emergency cash, ranked from best to worst
Although the coronavirus relief bill would ease some of the rules for dipping into 401(k)s and other retirement accounts, clients are advised to make a number of considerations before making a decision, writes Morningstar's Christine Benz. That's because these accounts may not be a good source of emergency cash because they are subject to strictures, hefty costs and taxation, she writes. Instead, clients who want to improve their cash flow should tap their emergency fund, short-term securities, low-risk assets in taxable accounts, Roth IRAs and life insurance cash values.

Advising clients on using a backdoor Roth IRA
The backdoor strategy is a very attractive option for high-income clients who cannot contribute directly to a Roth IRA because of income limits, according to this article in Yahoo Finance. "Advisors should encourage most of their clients that exceed the contribution income limits to open Roth IRAs through the backdoor process," says an expert. "The benefits of tax-free growth and withdrawals are exceedingly powerful, and the flexibility that comes with Roth IRAs opens multiple estate planning and retirement pathways."

Retirement savings hack thanks to this year’s delayed deadline
The IRS has pushed the deadline for filing taxes and making 2019 contributions to July 15, and clients should take advantage of this extension to boost their retirement savings, according to this article in MarketWatch. The ongoing market downturn also creates an opportunity for investors to contribute to a Roth IRA, an expert says. “The thinking here would be to get your cash invested while the market is 20%+ below its highs,” he explains. “Any growth from these lower prices would all be tax-free in the Roth IRA.”

First, prove you’re listening; then make sure they know you’re taking action to protect their portfolios.
March 17

Inherited an IRA? Clients can skip their distribution for 2020
The coronavirus relief law includes provisions that waive the required minimum distributions from 401(k)s and IRAs this year, according to this CNBC article. This waiver also applies to clients who have to take mandatory distributions from their inherited IRAs. However, cash-strapped beneficiaries who are in a low tax bracket would be better off taking the RMDs from traditional IRAs and 401(k)s rather than their Roth accounts. “I’d be more careful with Roth IRA beneficiaries. You’d want to hold the tax-free account as long as possible because it’s accruing tax-free," says retirement expert Ed Slott.

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Estate planning Trusts Coronavirus Tax planning 401(k) Roth IRAs Retirement planning