A few years ago, two sons of a wealthy attorney inherited their widowed father's $1.3 million IRA in October. They were 23 and 25 years old and two checks for $650,000 were sent directly to the boys from the custodian, (a well known brokerage firm).
By Christmas the money was gone! On April 15th of the following year they each were presented with a tax bill of $260,000.
Impossible you say? Not so. Such an event like that happens all too often and can happen to you if you don't properly plan for the distribution of these untaxed accounts that are simply an IOU to the IRS.
How would you like to toil your entire life, build a sizeable estate with $2 million in your IRA that you had rolled over from the lump sum you received at retirement from General Mills, only to have Uncle Sam confiscate $1,400,000 of it at your death?
Life never goes according to plan. If we had a magic wand, we'd all peacefully die in our sleep on our 93rd birthday after living an invigorating life. That way we'd never have to be a burden on our children or spend a fortune during the last few years of our lives in an assisted living facility or a nursing home.
According to poll after poll, the biggest fear most Americans have is that our health will fail, we'll get stuck in a costly Long-Term Care facility, run out of money, and die destitute and alone. In fact, today more than ever, as baby boomers deal with their own probable longevity and the care of their parents and loved ones, the topic of providing for their own care has catapulted to the top of the list of concerns.
You don't need to panic, but you do need to know the hard truths about the Long-Term Care crisis.
One of the most important aspects in estate and retirement planning is determining your time horizon. Knowing how long you have to accumulate, distribute and transfer your assets is critical in proper planning.
While numerous planning systems go to great lengths to focus on investment returns, cash flow planning, tax planning, and presentation outputs, little attention is given to determining your planning horizon.
Everyone is familiar with Ebenezer Scrooge, the fictional character from Dickens' A Christmas Story, who is given a second chance to change his evil ways by the three Ghosts of Christmas.
His tale is the classic example of true repentance. A total change of character for good.
Little is known, however of his deceased business partner, Jacob Marley who is a chained and tormented ghost, damned to eternally wander the earth as punishment for his greedy, selfish and uncaring attitude towards mankind.
Through some unknown means, it is Marley who actually arranges for Scrooge’s possible redemption, an opportunity he either was never offered or one that he refused.
Regardless Marley's eternal existence is absolute misery, a terrible price to pay for being a miser.
Perhaps the best part of my job is to witness the goodness that is created when those that have plenty share with those that have less.
The other evening I had a meeting with several highly successful businessmen. As with most lengthy conversation we ended up taking about politics.
It was a multi-party group and no one verbalized their specific political agenda. We were there to discuss the future of the world economy.
One of the attendees asked the moderator the question that appeared to be on everyone's mind, "Do you think President Trump will be able to achieve his stated goals during the next three years, especially his tax reform strategy?"
I found the moderator’s answer troubling: "No, because the Republican Party is divided into four groups and they can't agree on anything. It's a stalemate. A hung jury."