Is your lawyer in your wallet?

You know who your lawyer is, does anyone else? After someone passes away it can be very challenging for the family and friends to find what needs to be found. If they can find your lawyer, they can start to finding everything they need to find to get your assets to those you love.

Here are 4 simple suggestions on what you can do to make it easier for yourself while you are alive and less stressful for your family once you are gone.

1. Put your lawyer's name in your address book under A for attorney or under L for Lawyer.

2. Tape your attorney's business card to your refrigerator.

3. Tell your spouse, a close friend, and your kids your lawyer's name.

4. Put your lawyer's business card in your wallet.

The proper title of an inherited IRA for the stretch

If you've inherited an IRA from someone other than your spouse, here are two choices regarding what you may choose to do with the money.

Choice 1: Cash it out and spend the money. If this is a regular IRA as opposed to a Roth IRA, you will pay income tax on money you withdraw from the IRA. A good guideline is to expect to pay income tax on one of every three dollars you receive from the IRA.

Choice 2: Retitle the IRA and stretch the withdrawals. If you choose to do this, you will be required to make a withdrawal of a "required minimum distribution" amount. Income tax will be owed on the withdrawals. The money that remains in the IRA will continue to grow income tax deferred. This may have the effect of substantially increasing your initial inheritance. The minimum amount you must withdraw each year is determined by the IRS and is computed using an actuarial table based upon your age. In addition to taking the minimimum required distribution, you may also withdraw additional funds as you desire.

If you decide to stretch your inherited IRA, you must properly re-title it. Otherwise the IRS may not permit you to stretch the withdrawals and instead require a speedier withdrawal rate. The title should be as clear as possible so that there is no doubt who the IRA belonged to, why you have it, and who you are.

An example of proper retitling:

Mary Bloom IRA/Deceased 10/12/2009/FBO Virginia Bloom Dahlia

Once the inherited IRA is retitled, check your statements carefully for accuracy in titling. You should check the statement you receive as well as have the institution advise you what wording they are using on the documents they send to the IRS. Finally, check your end of year tax statements to ensure that the proper title is being used on official documents sent to the IRS.

Federal Estate Tax Exemption increased to $3.5 in 2009; Maryland Remains at $1.0 million

The Maryland estate tax exemption amount remains at $1,000,000 in 2009. What this means in plain English is that you can give up to a total of $1,000,000 after you die to those you love (besides your spouse or your favorite charities) without incurring Maryland estate taxes. If you give more than $1,000,000, some of your gift will be spent on paying Maryland estate taxes at a rate of approximately 16%.

For example if you have an estate worth $2,000,000 to give to your three kids, the first $1,000,000 goes to them estate tax free. The next $1,000,000 incurs an estate tax of approximately $100,000 reducing the total gift from $2,000,000 to $1,900,000.

The Federal estate tax exemption has increased to $3,500,000 in 2009. Again in plain English, you can give up to $3.5 million after you die to those you love (besides your spouse and favorite charities) without your estate owing federal estate taxes. Anything over that is taxed at at 45%. For example, a total gift to your children of $4,000,000 would be exposed to both Maryland estate taxes of approximately 16% of any amount over $1,000,000 and federal estate taxes on the amount greater than $3,500,000.

There are legal well-accepted ways to reduce estate taxes. If you are in the fortunate position of having an estate as described above, I urge you to consult with an estate lawyer to properly plan your posthumous gifts.

Gift exclusion is $13,000 in 2009

Each year you can make tax free gifts to whomever you choose so long as you limit your gifts to the annual gift exclusion amount. This year's gift exclusion amount is $13,000. If you give more than this amount to any one person, then you must pay federal tax on your gift. If you are so inclined, you can give $13,000 per person to just about anybody you choose. If you decide to give more than $13,000 to one person, consult your attorney or accountant to ensure that you file the correct forms with the IRS.



For most of us the question isn't how much to give but why give anything? The tax reason people make substantial gifts while they are alive is to reduce the value of their estate after they have died. Estates greater than $1,000,000 are subject to a 16% Maryland estate tax and estates greater than $3,500,000 are subject to both a 16% Maryland estate tax and an even more substantial 45% Federal estate tax. If you have gifted money while you are alive, your estate can be reduced tax free and the gift can reduce or even eliminate the exposure to estate taxes after your death.