Posted by & filed under CARES Act 2020.

Key Provisions of the CARES Act You Need to Know for 2020

“CARES” stands for “Cornonavirus Aid, Relief and Economic Security” and was designed to help people whose livelihood was affected by the COVID 19 virus.  It outlined assistance the government is providing for people during these tough times.  The government has implemented provisions within the CARES Act that may benefit retirees as well.  Let’s take a look at some of the areas of the CARES Act that should have an impact on our population, remembering to keep in mind that the rules are changing daily.

Economic Impact Payment Checks Are Coming

Economic Impact Payment aka stimulus checks were to be sent out to every American to help with these tough financial times.  It was in the amount of $1200 per individual and $500 per child within that home that was under the age of 17.  A married couple would receive $2400.  This payment was based on the tax paperwork that was filed in 2018, should the 2019 tax filings not be completed.  Some people did not have their 2019 taxes filed when this all started.  There were some rules for getting this check.  The amount was reduced for those that make more than $75K per year or for a couple that makes $150K per year.  The people that make over $99K will not be getting a stimulus check and couples over $198K will also not be eligible.  Haven’t received your stimulus check yet? Click here to find out your status, but make sure to have your 2019 taxes on hand.

Business Owner Relief is Coming

During COVID 19 businesses have been extremely hard hit.  This assistance was meant to help them get through this.  The CARES act issued $500 billion in loans, investments to businesses, municipalities, and loan guarantees.  According to the Small Business Administration “In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories were able to apply for an Economic Injury Disaster Loan advance of $1,000 per employee up to $10,000, . This advance is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue. This loan advance will not have to be repaid.” This is an ever-changing situation so it’s best to monitor their website for further updates.

Inherited 401(k) Distributions Waived

For 2020 inherited accounts, IRAs, 401 (ks)s distributions can be waived.  The CARES Act makes it easier to withdraw funds saved in certain tax-advantaged retirement accounts like 401(k)s and traditional Individual Retirement Accounts (IRAs). These changes are temporary and eliminate tax penalties on certain early withdrawals and relax the rules on loans you can take from some types of accounts.  Be warned, however, not all tax-advantaged retirement account holders are able to take advantage of the CARES Act’s relaxed early distribution and loan provisions. You should know that the legislation restricts this form of relief to qualified participants with a valid COVID-19 related reason. You must:

  • Be diagnosed with COVID-19
  • Have a spouse or dependent diagnosed with COVID-19
  • Experience a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare because of COVID-19

Withdrawal Penalties Waived

If you want to remove your money from your IRA in 2020, you may do so without the penalty before the age of 59 1/2.  There are some limits though, you can only withdrawal $100K and you will still have to pay the taxes on the money you withdraw.  Under the CARES Act, the 10% penalty has been waved. Referred to as “coronavirus related distributions,” these penalties are waived only in 2020.

Required Minimum Distributions Suspended for 2020

As you are probably aware of, RMDs are the government’s way of finally getting ahold of some of the money that’s grown tax-deferred for decades in your traditional 401(k) or IRA. From the age of 72, retirees must withdraw a minimum amount from their account each year and pay income taxes on it. For 2020 the CARES Act will help cover those in need by waving the minimum people can withdraw from their 401 (k)s and IRAs.

There are plenty of businesses and individuals that are struggling with COVID-19 and the Shelter in Place that has come with it.  This has brought on financial, emotional, and stressful burdens to many families and businesses.  The CARES Act was enacted to hopefully relieve some of these burdens and help keep the economy going through these tough times.  Many businesses have been fully closed down, the unemployment rates are skyrocketing and the economy is veering towards a recession.  The CARES Act is a sign of hope. 

What Should I Do Now?   

During these unprecedented times, you should know that things will get better.  We are stronger together and will weather this experience like we have weathered many others in our nation’s history. The Law Offices of Joel A Harris are more than prepared to provide you with legal counsel pertaining to your planning, execution, or, and any other legal concerns or questions you may have. The Law Offices of Joel A Harris, located in Concord, Walnut Creek, and Antioch are available to help you to the best of their abilities. If you are not sure if your estate is protected or you just want some help navigating the legal side of planning your estate, feel free to visit us online, in person, or call us by phone at (925) 757-4605. 

Sources

  1. https://www.sba.gov/funding-programs/disaster-assistance/coronavirus-covid-19
  2. https://www.forbes.com/advisor/retirement/cares-act-retirement-account-rules-covid-19/ 
  3. https://www.cnbc.com/2020/05/05/penalty-free-401k-withdrawals-may-be-more-complicated-than-you-think.html
  4. https://money.com/rmd-401k-roth-ira-requirements-2020/

Posted by & filed under Cyber Security, Estate planning, Retirement Planning.

With the rise of the digital age, the idea of having a digital inheritance plan in place has become more of a necessity than ever before. It’s not commonly thought about, but what happens to your Facebook account when you cannot manage it anymore? What about that obscure membership you joined so you could get 2 free movies a month in the movie theater? It may sound strange, but these online accounts are considered assets, and as such, you should have a plan in place for handling them when the time comes. We have created a quick cheat sheet to address how to handle setting up this kind of digital inheritance.

1) Make a List of Your Accounts, Logins, and Passwords – With Dates!

This sounds like a daunting task, but it should not be taken too lightly. Many of us have a massive amount of accounts. From email to social media to healthcare portals to software licenses the average person has about 90 online accounts! If you are an online shopper that number can increase by 10 times! Organizing them, recording all the passwords and usernames will take some time. However, if someone is going to take over managing them, they will need to know what they are managing and how to get into the account. Additionally, digital devices that have value should also be considered in the inventory. The computer you paid $3,000 for last year still has value, and you should take note of that device so your digital executor will know what you want to be done with it.

2) Make a Choice on What to do with your accounts and hardware

Once you have all of your accounts and devices organized with the logins, recovery questions, and phone numbers, you will need to make choices. What do you want to be done with your Amazon Prime account? Can it get passed on to your husband? What about your Spotify membership? Should it just be canceled? How about your Facebook account? You will also need to look up the contracts of some of the accounts since sometimes membership cannot be transferred, so that account will need to be closed. For devices with personal information (computers, tablets, etc.) you will want to decide if that information needs to be saved and what can be erased.

3) Appoint Someone You Trust

Again, this decision requires careful thought. If you have organized everything well, it should not be too difficult to hand over the information to your Executor or Trustee. This is often a trusted family member, friend or trust company. Your “digital executor” does not have to be the person named in your Will or Trust to handle all of your other assets. It can be someone specially designated to take care of the digital side of your estate. However, make sure that they are listed in your estate plan as your digital executor or trustee.

4) Store Your List of Organized Logins

Now that you have a list of all of your logins for every device and account that you own, you need to store it in a safe place. If this list falls into the wrong hands your accounts will be vulnerable. Additionally, you will need to keep this list someplace fairly accessible, so that you can update it as you gain new accounts, change passwords, etc. Some safe places include with your attorney, in a digital locker, or in a physically secure location (a file cabinet or lockbox).

What Should I Do Now? 

Digital inheritance planning is difficult, and you may still have some remaining questions. The Law Offices of Joel A Harris are more than prepared to provide you with legal counsel pertaining to your planning, execution, or, and any other legal concerns or questions you may have. The Law Offices of Joel A Harris, located in Concord, Walnut Creek, and Antioch are available to help you to the best of their abilities. Joel Harris is an attorney with over 25 years of experience and is extremely familiar with this process. If you are not sure how to begin, or you just want some help navigating the legal side of your digital inheritance process, feel free to visit us online, in person or call us by phone at (925) 757-4605.

Sources

  1. https://en.wikipedia.org/wiki/Digital_inheritance
  2. https://www.sans.org/security-awareness-training/resources/digital-inheritance
  3. https://www.everplans.com/articles/digital-cheat-sheet-how-to-create-a-digital-estate-plan
  4. https://www.mondaq.com/uk/Family-and-Matrimonial/238876/Creating-A-Digital-Inheritance-For-Online-Assets-And-Personal-Data

Posted by & filed under Estate planning, Inheritance Tax, Living Trust, Loss of a Spouse, Secure Act.

Saving for retirement is a task that unfortunately we Americans have become worse and worse at over the years. Over half of the American population has not saved enough for retirement at the time of retirement and end up having to return to work with at least a part-time job. A full 25% of Americans don’t have any retirement savings or plans in place at any given time in their working careers. However, a law that was just signed into law by Congress on December 20, 2019, aims to improve and aid in Americans preparing and saving for retirement. The bill, called The Setting Every Community Up for Retirement Enhancement (SECURE) Act, has five major key takeaways that affect estate planning:

  • Part-time employees will now be qualified for retirement plans under their employers.
  • Small business owners will now be able to set up 401(k) accounts for their employees. 
  • 401(K) statements will now need to disclose potential monthly payments to the recipient on every balance statement 
  • The age at which you need to begin withdrawing money from retirement savings accounts has been shifted to 72 years, instead of 70.5 years. 
  • IRA distributions have been drastically altered.

How Are Part-Time Employees Affected?

 Under the SECURE Act, part-time employees who work at least 500 hours a year and have been with the institution for 3 years or more will now not be exempted from contribution plans from the employer. This will have a huge impact on those who have moved from full-time employment to part-time, instead of fully retiring. This will have a major impact on those who are 65 and above, who, in the last decade or so, have been forced to continue working in some capacity because their retirement accounts cannot support them fully. 

How Are Small Business Owners Affected?

The next large take-away from the SECURE Act is that now small businesses will be able to offer retirement plans for their employees. Previously, it was costly for small businesses to offer these kinds of options to their staff members, leaving employees to plan for themselves. Now, it will increase the cap of the income that employees need to be able to save from 10% of income to 15% of their income. This adjustment is important for those who have spent their lives in small businesses, and have been left to their own devices in terms of retirement planning. This aims to assist them in making their retirement planning more feasible.

How is My 401K Affected by the SECURE Act?

 Another significant part of the SECURE Act is the transparency it will require from 401(K) accounts. As of right now, 401(K) accounts are not required to disclose the monthly allowance the retiree would be receiving on each statement. While this might seem trivial, the sum of money saved has been allowing Americans to become falsely secure in the amount they are saving, without having a real concept of what that sum will translate into. Now, 401(K) accounts will be required to display the monthly allowance on every balance, for the retiree to better understand exactly the sums they will be receiving when they do retire. 

How Does the SECURE Act Affect Our Retirement Age?

Finally, the SECURE Act adjusts the age at which people need to begin withdrawing money from 70.5 years to 72 years of age. While this is a subtle change, since the majority of people are working into more advanced years anyways, those who do not need to withdraw money will have an additional 1.5 years to keep that money in their retirement accounts. Withdrawals from the retirement accounts are still allowed before then, but this increase in age is aimed at helping those who are continuing to work anyways, by allowing them more time to save.

How Does the SECURE Act Affect An IRA?

Trusts should no longer be beneficiaries of most IRA’s under the SECURE Act.  Previously if your living trust was written properly your trust could be the benefit of your IRA so that your trustee could maintain some control over your beneficiaries.  Now with the SECURE Act, if your trust is named one of the beneficiaries, the beneficiaries of the trust will probably have to take distribution of the entire IRA in the 10th year after death, which will result in a larger tax burden. Finally, if your IRA beneficiary is very young or disabled, you will want to consider a “trusteed IRA” which allows a professional to manage the IRA after your death.

How Does the SECURE Act Affect My Inherited IRA?

You will have to pay taxes on inherited IRAs sooner than you may have expected. The SECURE Act essentially eliminates the “stretch IRA,” which was an estate planning method that allowed IRA beneficiaries to stretch their distributions from their inherited account — and the required tax payments on them — based on their life expectancy. For example, if you named a grandchild as your beneficiary, most of your account could’ve stayed invested for decades after your passing, and the grandchild could’ve continued to take advantage of the tax benefits. Under the new law, however, most beneficiaries must now withdraw all the distributions from their inherited account and pay taxes on it within 10 years. The exceptions to this are for spouses and the chronically ill or disabled. One important thing to remember is that this provision is not retroactive and will not affect those who have already inherited an IRA. It will apply to those starting on Jan. 1, 2020, and may affect the estate planning of those planning to pass on an IRA to a non-spouse.

What Should I Do If My Living Trust Is Named As Beneficiary Of My IRA?

Under the SECURE Act, if your living trust is named as beneficiary of your IRA, your beneficiaries will probably only have two options, both bad: cash it all out immediately, or cash it all out in year 10.  This may cause a huge tax.  There are other options available, but these need to be explored on a case by case basis.  For most people, you simply need to name your spouse as primary IRA beneficiary, and your children as contingent IRA beneficiaries.  However, if your children are young, disabled or foolish, other options will need to be explored.  For example, you may be able to name a trust company or fiduciary as trustee of your IRA.  You can also explore ROTH IRA conversions with your tax and financial advisor.  More complex but powerful options may also be available.

What Should I Do Now?   

With these new changes in retirement planning, you may still have some remaining questions. The Law Offices of Joel A Harris are more than prepared to provide you with legal counsel pertaining to your retirement, establishing a trust to protect your legacy and your assets, and any other legal questions you may have. Whether it is in retirement planning or any other kind of legal counsel, The Law Offices of Joel A Harris, located in Concord, Walnut Creek, and Antioch are available to help you to the best of their abilities. Joel Harris is an attorney with over 25 years of experience and is extremely familiar with this process. If you are not sure how to begin, or you just want some help navigating the legal side of your retirement process, feel free to visit us online, in person or call us by phone at (925) 757-4605.

Sources

  1. https://money.com/what-serure-act-retirement-law-means-for-you/
  2. https://www.bankrate.com/retirement/how-secure-act-could-impact-retirement-savings/
  3. https://www.investopedia.com/what-is-secure-act-how-affect-retirement-4692743
  4. https://www.forbes.com/sites/jamiehopkins/2019/05/24/8-major-ways-the-secure-act-could-impact-your-retirement-plan/#1a8d36d63437 
  5. https://www.kiplinger.com/article/retirement/T021-C032-S014-4-estate-strategies-for-retirees-after-secure-act.html