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IRA: Retirement or Succession?
Negative Interest Rate Fun
Withdrawals from a Minor's UTMA Account
Considering Intra-Family Loans
Timing Social Security Benefits


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IRA: Retirement or Succession?

There is much ado in the financial world concerning various proposals to curb the use of the stretch IRA approach and otherwise change the current rules. Pundits decry the “devastating consequences” to some IRA owners if the changes are approved by Congress. Specifically, the Secure Act proposal would require complete distribution from many IRAs within ten years of the IRA owner’s death.
While this might seem hard for a person who planned to leave their IRAs to younger generations, letting them face the income taxes as and when they took distributions, a closer look suggests otherwise.

Negative Interest Rate Fun

Negative interest rates, could there be anything more unappealing? Banks don’t like it because they have to pay the government interest on the reserves they hold and have not made available to lend. The government believes that the negative rates will lead banks to loan out the money instead of holding it and that as a result the economy will improve due to the added funds out there working.  The idea is also to boost inflation, a bit, also to help the economy. Of course, the government also requires the banks to hold substantial reserves in case there is a liquidity crisis (such as a run on banks).

Withdrawals from a Minor's UTMA Account

Gifts to minors range from cash in a birthday card to very substantial gifts to accounts established to receive those gifts and hold them until the minor attains their majority and can access the funds. It is not unusual, however, for a parent to wish to disburse some of those funds on behalf of that minor at some point before the minor is able to access the funds.
Whether it is to purchase a car or perhaps pay for a trip, the amount may be substantial and it is important for all to keep in mind the applicable rules.

Considering Intra-Family Loans

A not uncommon situation in many families is the interplay between family members with more goals than funds and those with more money than goals to spend on. The familial relationship makes for a desire to help other family members in need and to take that action within the family without the need to go to a bank or other source of funding.
If you face this situation, an important consideration is how the transaction should be carried out. Even though it is within the family, a simple handshake and verbal agreement is probably not enough for either party.

Timing Social Security Benefits

There have been plenty of studies examining the mass of data collected about Social Security including the timing of claims, the average benefits, the annual adjustments to benefits, claiming strategies and more. One fairly consistent finding of these studies is that a significant number of workers claim their benefits as soon as they are available and very few defer their initial claim for benefits to age 70. The consensus seems to be that those who claim when first eligible, age 62, are making a mistake that will cost them greatly in terms of the total benefits received over a lifetime.

Simplify Your Financial Life

All too often, we see clients with a potpourri of investments, accounts funded from various sources, opened at different times and using different advisers. There is no overall plan or strategy and the client usually doesn’t exactly know what they have. This is a clarion call for the client to organize and simplify their finances.
What can one do? Merge similar accounts such as IRAs, CDs and brokerage accounts. Exit, combine or exchange products such as annuities and insurance. These actions not only make it easier for you as owner to keep up with what you have but it will save a great deal of effort and aggravation for your personal representatives when you either become disabled or die.

Updating Coverage to Meet Changing Needs

A common issue facing many investors is knowing when the reasons for owning a particular investment no longer apply and how best to exit that investment. One area where this issue may arise is with the ownership of multiple life insurance policies. Often sold as an investment, life insurance may build cash value in addition to its provision of a death benefit in the event of an early and unplanned death.  The ability to combine the risk protection of pure life insurance with the choice of investments within the policy is attractive to some.

The SECURE act and your IRA

Changes to the treatment of IRAs are the focus of the proposed SECURE act. Previously, we addressed a change to the timing of required minimum distributions from IRAs, the act proposing to make age 72 the new beginning date instead of age 70 ½. Since that time, much more attention and discussion has been given to the proposed treatment of inherited IRAs. For most beneficiaries, the new rule would require complete distribution of the IRA within ten years of the death of the IRA owner.
One objection to the proposed change is that it would adversely impact the long term and estate planning of some IRA owners who intend to allow their heirs to take advantage of the stretch IRA to take withdrawals from the inherited IRA over their life expectancies.

A Most Important Consideration in Planning

Financial planning is a central part of what most investment advisers do for clients. Simply recommending investments because they are surefire winners (as if they ever really can be) will fall flat without consideration of the context of a client’s investing. That involves many factors ranging from age and health to employment status and from the nature of assets to the details of spending and estate goals. However important all these factors – and more – may be to a financial plan and its associated investment recommendations, there is one factor that plays an outsize role and at the same time may be all but invisible to the adviser.

Is Best Interest Really Best?

Much of the discussion surrounding the best interest rule has referenced the requirement that investment advisers are fiduciaries to their clients while brokers are not held to that fiduciary standard. Regulation Best Interest and the new customer relationship summary are intended to provide investors with a clear description of the duties and obligations of investment advisers, broker-dealers and dually registered persons and firms. Not surprisingly, this new approach is not meeting with universal approval and acclaim.
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