Jim Nabors Saved $4.8 Million in Taxes By Marrying His Husband

Posted on by in Current Events, Estate Planning, Estate Tax, Income Tax and tagged , , , , , , .

How Jim Nabors saved $4.8 Million in taxes by marrying his husband. Courtesy of PayTaxesLater.com

 

Jim Nabors: Actor, Singer, and Comedian

On November 30, 2017, Jim Nabors, perhaps most famous for his role as Gomer Pyle, died at the age of 87.  Jim is survived by his husband Stan Cadwallader, whom he married in 2013. Their marriage came one month after same-sex marriages became legal in Washington State.

It is quite eye-opening to look at the tax consequences of their decision to get married; Mr. Nabors died with a $13M estate.  The terms of his will are not public, but for the sake of argument let’s assume he left his estate to his husband. Because of the marriage, no Federal or Hawaiian estate or inheritance taxes are due at death because of the unlimited marital deduction.

Smart Estate Planning

If Jim and Stan had remained unmarried partners the payout to the Government would have been astronomical. A $3,000,000 payment in federal estate taxes alone is bad enough. A payment of over $1,800,000 in Hawaiian inheritance taxes would add a total of $4,800,000 in total taxes. These numbers don’t include the income taxes that will be saved because of the longer “stretch” a spouse receives on an inherited IRA or retirement plan.

The moral of the story is that for many life-long partners, gay or straight: Get Married for the Money.  Obviously the decision to marry hinges on more than whether marriage is a financially strategic move. But if you are simply avoiding the formalities, it might make sense to think about the long-term tax consequences on your financial security—for both you and your partner. Marriage is usually a big plus for purposes of Social Security, especially if one partner has a much stronger earnings record than the other partner.

More Information Is Always Available

For more information visit www.paytaxeslater.com.To schedule an appointment with Jim Lange, please call his office at 412-521-2732. You can always contact Jim at jim@paytaxeslater.com.

James Lange, CPA/Attorney of Lange Financial Group, LLC, is the author of several books on retirement and estate planning, including Live Gay, Retire Rich.  His books on retirement strategies have been endorsed by Charles Schwab, Larry King, Jane Bryant Quinn, Ed Slott, and many more.  He hosts a weekly financial show on KQV News Radio in Pittsburgh. PA.

 

Life Insurance: Is It Right for Your Estate Plan?

Posted on by in Beneficiary Designations, Estate Planning, Estate Tax, IRAs, Life Insurance, Retirement Planning and tagged , , , , , , , .

Insurance salesmen are often maligned and are frequently the butt of some pretty bad jokes. At the risk of being categorized with those poor men and women, I’ll tell you that I don’t hesitate to recommend life insurance to many of my own clients after evaluating their estate planning needs. Why? Because when it is appropriate and structured properly, life insurance has a number of benefits that make it an excellent and possibly the best wealth transfer strategy.

If you read the earlier chapters, you learned that legislative changes since 2009 mean that federal estate tax is an issue for far fewer taxpayers than in the past. The IRS wasn’t feeling guilty about charging estate tax on your assets, they just gave more people a reason to worry about a completely different problem called federal income tax. Chapter 12 of Retire Secure! delves into some techniques that show how life insurance can be used to help minimize the damage to the estate caused by income taxes at death. It also discusses how life insurance can be used to provide liquidity for a number of estate settlement needs, and also how it can be used to benefit the estate if there is a disabled beneficiary. While life insurance can be extremely beneficial it is important to remember that in situations where taxes and other estate needs aren’t a concern, the cost of the life insurance – especially for a senior citizen – might not be worth it.
Life Insurance, Retire Secure, James Lange

In earlier chapters, there are several references to the possibility that Congress may eliminate the benefits of the Stretch IRA. Chapter 12 introduces some new ideas regarding the inclusion of a Charitable Remainder Unitrust (CRUT) in certain estate plans. How do you think your children would react if you named a charitable trust as the sole beneficiary of your retirement plan? They might react very favorably when they find out that, in the long run, they could end up with a lot more money.

This is a very complicated estate planning technique that is not appropriate for everyone. Under the right set of circumstances, though, life insurance can be a very effective addition to an estate plan – especially if the owner of the IRA has always supported charities. Would you like to endow a chair at your local university or symphony orchestra, or perhaps provide financial support for your favorite hospital or religious organization long after your death? Read Chapter 12 to learn the basics of this strategy, and how life insurance can play a key role.

Stop back soon for an update on some really big news about the possible death of the Stretch IRA.

Jim

Jim Lange, Retirement and Estate Planning A nationally recognized IRA, Roth IRA conversion, and 401(k) expert, he is a regular speaker to both consumers and professional organizations. Jim is the creator of the Lange Cascading Beneficiary Plan™, a benchmark in retirement planning with the flexibility and control it offers the surviving spouse, and the founder of The Roth IRA Institute, created to train and educate financial advisors.

Jim’s strategies have been endorsed by The Wall Street Journal (33 times), Newsweek, Money Magazine, Smart Money, Reader’s Digest, Bottom Line, and Kiplinger’s. His articles have appeared in Bottom Line, Trusts and Estates Magazine, Financial Planning, The Tax Adviser, Journal of Retirement Planning, and The Pennsylvania Lawyer magazine.

Jim is the best-selling author of Retire Secure! (Wiley, 2006 and 2009), endorsed by Charles Schwab, Larry King, Ed Slott, Jane Bryant Quinn, Roger Ibbotson and The Roth Revolution, Pay Taxes Once and Never Again endorsed by Ed Slott, Natalie Choate and Bob Keebler.

If you’d like to be reminded as to when the book is coming out please fill out the form below.

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The Clear Advantage of IRA and Retirement Plan Savings during the Accumulation Stage

Posted on by in 401(k), Estate Planning, Estate Tax, Income Tax, IRAs, Lange’s Cascading Beneficiary Plan, Retirement Planning, Roth 401(k), Roth IRA, Tax Law.

If you are working or self-employed, to the extent you can afford to, please contribute the maximum to your retirement plans.

Mr. Pay Taxes Later and Mr. Pay Taxes Now had identical salaries, investment choices, and spending patterns, but there was one big difference. Mr. Pay Taxes Later invested as much as he could afford in his tax-deferred retirement plans—even though his employer did not match his contributions. Mr. Pay Taxes Now contributed nothing to his retirement account at work but invested his “savings” in an account outside of his retirement plan.

Please look at Figure 1. Mr. Pay Taxes Later’s investment is represented by the black curve, and Mr. Pay Taxes Now’s, by the gray curve. Look at the dramatic difference in the accumulations over time—nearly $2 million.

There you have it. Two people in the same tax bracket who earn and spend an identical amount of money and have identical investment rates of return. But, based on the simple application of the “Pay Taxes Later” rule, the difference is poverty in old age versus affluence and a $2 million estate.

Can't see this image - go to https://www.paytaxeslater.com/ and download the book!

Retirement Assests, IRAs vs. After-Tax Accumulations

Retire Secure! Pay Taxes Later – The Key to Making Your Money Last, 2nd Edition, James Lange, page. xxxi  https://www.paytaxeslater.com/

Have you done your year-end tax planning?

Posted on by in Estate Planning, Estate Tax, Income Tax.

“Year-end tax planning is always complicated by the uncertainty that the following year may bring and 2012 is no exception. Indeed, year-end tax planning in 2012 is one of the most challenging in recent memory.

A combination of events – including possible expiration of some or all of the Bush-era tax cuts after 2012, the imposition of new so-called Medicare taxes on investments and wages, doubts about renewal of many tax extenders, and the threat of massive across-the-board federal spending cuts – have many taxpayers asking how can they prepare for 2013 and beyond … and what to do before then.

The short answer is to quickly become familiar with the expiring tax incentives and what may replace them after 2012 … and to plan accordingly. Year-end planning for 2012 requires a combination of multi-layered strategies, taking into account a variety of possible scenarios and outcomes(CCH tax briefing 2013).”

If you have questions or concerns about your tax situation in 2013 and beyond, speak to your advisor and start your planning now.

If we can help, call our office at 412.521.2732.

Take the 10-second test!

Posted on by in Estate Planning, Estate Tax, Income Tax, IRAs, Roth IRA, Roth IRA Conversions.

Please take the next 10 seconds to complete this survey about your financial future. . . you might rediscover some opportunities for financial growth.

Are you concerned about outliving your income?

Would you like to reduce (possibly eliminate) your quarterly estimated tax payments?

Would you like to see your grandchildren go to college?

Are you concerned about going into a nursing home?

Would you like to earn more competitive interest and preserve the safety of your nest egg?

Are you concerned about the stock market going down?

Would you like to find out how to take money out of your IRA tax free?

Is your house still titled as joint tenancy? (If yes, you are probably making a serious mistake!)

Are you concerned about which option to make regarding your minimum distribution requirements from your IRA at age 70 1/2?

Do you want to get more information on the Inherited IRA that can possibly continue your IRA for 30, 40, 50 years or longer even after you pass away?

Are you concerned about the likelihood that the government will get over 50% of your retirement accounts after you pass away?

If you have answered, Yes, to 3 or more of these questions, you should come in for a complimentary review!  Call 412.521.2732 and ask for Alice.

Remember, what you don’t know can hurt you!

 

Life Insurance Awareness Month

Posted on by in Estate Planning, Estate Tax, Life Insurance.

Life insurance isn’t a big part of what we do here at Lange Financial, but it is an important part. As September is Life Insurance Awareness Month, we want to share some important life insurance facts with you all.

Did you know that depending on the size of your estate, your heirs could be hit with a large estate tax payment after you die. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets. And life insurance proceeds are generally income tax free and can be arranged to avoid probate. Finally, if your insurance program is properly structured, the proceeds from your life insurance policy won’t add to your estate tax liability.

Think it over. If you are one of the 35 million American households that are uninsured, you might want to consider what a life insurance policy could mean for your heirs.

2011 Changes in Tax Law

Posted on by in Estate Planning, Estate Tax, Income Tax, Lange’s Cascading Beneficiary Plan.

The recently enacted “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010” (the “2010 Tax Act”), signed by President Barack Obama on December 17, 2010, makes important changes to the taxation of estates and gifts, which will affect many grandparents. This Act significantly increases the prior exemptions for estates and gifts. It will affect many existing wills and estate plans, so it would be wise for grandparents to review their estate-planning documents with their attorneys to determine if changes are appropriate.

The 2010 Tax Act reinstates the federal estate tax at rates of 35 percent (as opposed to 45 percent under prior law) and provides for a federal exemption of $5 million for individuals and $10 million for a husband and wife for 2011 and 2012. It also keeps the tax rate at 35 percent for gifts made in 2010 through 2012. The lifetime gift-tax exemption amount is reunified with the $5 million estate-tax exemption, providing for a unified gift and estate tax exemption of $5 million for decedents in 2011 and 2012. This makes lifetime gifts much more attractive as an estate-planning vehicle.

Keep in mind that even though federal estate taxes have been eliminated on estates of less than $5 million (or $10 million, in the case of a surviving spouse), there may still be significant state estate taxes on estates of less than $5 million. New York State, for example, has not changed its $1 million exemption to conform to increases in the federal estate-tax exemption, and thus, a decedent with a $5 million estate who dies in New York will be subject to state estate tax of approximately $400,000, even though there is no federal estate tax.

Last Minute Tax Strategies for IRAs & Other Retirement Accounts

Posted on by in Estate Tax, Income Tax, IRAs, Roth IRA, Roth IRA Conversions, Tax Law.

Make your 2010 IRA contribution as late as April 18, 2011: 

You can contribute up to $5,000 (or $6,000 if you are 50 or older) until the time you file your income tax return, but no later than April 18, 2011.  If you participate in a retirement plan at work, the IRA deduction phases out if you are married and your joint AGI is $89,000 or more, or if you are single and your adjusted gross income is $56,000 or more.  Filing an extension will not buy you additional time.  Non-deductible pay-ins to IRAs and Roth IRAs are also due by April 18, 2011.

Make a deductible contribution to a spousal IRA:

If you do not participate in a workplace-based retirement plan but your spouse does, you can deduct some or all of your IRA contributions on your 2010 income tax return as long as your adjusted gross income does not exceed $177,000.

Make a contribution to a Roth IRA: 

Contributions to Roth IRAs are not tax deductible, but the earnings on them may be withdrawn totally income tax-free in the future as long as the distributions are qualified.  A Roth IRA distribution is qualified if you’ve had the account for at least five years, the distribution is made after you’ve reached age 59½, you become totally and permanently disabled, in the event of your death, or for first-time homebuyer expenses.  Contribution limits are the same as traditional IRAs, except the maximum contribution for both Roth and traditional IRAs is still limited to $5,000 or $6,000 for persons age 50 or older.

To make a full Roth IRA contribution for 2010, your AGI cannot  exceed $177,000 if you are married or $120,000 if you are single.  You are subject to the same limitations for a non-working spouse.  Subject to some exceptions, I usually prefer Roth IRAs to traditional IRAs or even traditional 401(k)s.

Look into Roth IRA conversions:

The rules for contributions to Roth IRAs are different from the rules for Roth IRA conversions.  Prior to January 1, 2010, you could only convert a traditional IRA to a Roth IRA if your AGI was $100,000 or less (before the conversion).  However, this dollar cap is now removed starting January 1, 2010 and there is no limit to your earnings in order to qualify for a Roth IRA conversion.  Please remember that a conversion to a Roth IRA may place you in a higher tax bracket than you are in now and have other adverse consequences, such as subjecting more of your Social Security to be taxable due to the increase in your AGI.  Please also note that a Roth IRA conversion does not have to be all or nothing. You can elect to do a partial Roth IRA conversion and you can convert any dollar amount you decide is best for your situation.  Our most common set of recommendations after “running the numbers” is usually a series of Roth IRA conversions over a number of years.  Please remember that a Roth IRA conversion may not be appropriate for all investors.

5 Things Taxpayers Can Proactively Do To Best Take Advantage of the New Income and Estate Tax Law

Posted on by in 401(k), 403(b), Estate Tax, IRAs, Tax Law.

There are some BIG changes for taxpayers in the creation of the new 2010 Tax Relief/Job Creation Act.  How can you best respond to this law?  Take a look at these 5 things all taxpayers can proactively do to best take advantage of the changes:

1.  With the money you save on the reduction of your social security tax, you should contribute at least that much additional money to your retirement plan.

2.  Contribute to your retirement plan in the following order:

  • Contribute whatever an employer is willing to match or even partially match
  • Contribute to your Roth IRA and if married to your spouses Roth IRA, even if your spouse isn’t working
  • Maximize your contribution to your Roth 401(k) or Roth 403(b) if available
  • If not available, maximize your contribution to your traditional 401(k) or 403(b)
  • If your income is too high to qualify for a Roth IRA, contribute to a nondeductible 401(k).

3.  Since we have two more years of low tax rates, make Roth IRA conversions.  Consider multiple conversions since you can “recharacterize” or undo them.  If you do multiple conversions, you can keep the ones that do well and undo the ones that don’t.

4.  Review your wills and trusts.  Many, if not most of the wills done for taxpayers with estates of $1 million are now outdated.  Not only will you not get optimal results, but your existing wills and trusts might be a huge restriction on the surviving spouse.

5.  Now that you can either leave or gift $5,000,000 or $10,000,000 if you are married, you should rethink potential gifts to children and grandchildren without tax laws that would otherwise restrict gifts you would like to make.