Feb 21

No, I’m not writing about the games, I decided I like the summer games a bit better anyway. But, with less regular TV, I has a great week of blog reading. So, let’s get going….

Trent at The Simple Dollar talked about When Living Cheap Catches Up With You. An interesting discussion of what happens after years of making do, not buying new, and in some cases, not keeping up with repairs. Prioritizing to get back on track.

Clutter is something I think many of of struggle with. I know I have and last July even guest posted about it at Serene Journey. This week I read The Clutter Calculator: What is Clutter Costing You? Tanna Clark hit my hot button, as a numbers guy, by actually listing what each type of clutter source may be costing you, both in time and money. Have a read and let her know if her advice helped you.

Worried about the AMT (alternative minimum tax)? Consumer Boomer will tell you How To Avoid Alternative Minimum Tax. Any ideas that can save me from paying money to the tax man is most welcome.

Christian PF’s Craig Ford asks How Much Can You Afford to Pay For a House? Craig takes a conservative view, and offers reasons to avoid the temptation to stretch to buy the very largest house you can afford. After giving it a bit of thought, I agreed with Craig’s approach for many reasons, and wrote a comment sharing my view.

In Personal Finance By The Book, Joe Plemon asks Should You Leave an Inheritance to Your Children? His article was less to tell you what to do and more to get people thinking about the impact an inheritance can have on your children or grandchildren. One of the topics too many ignore until it’s too late to do anything. Time to think about how you plan to leave your “stuff” when you pass on.

Some time ago I posted Dilbert’s Unified Theory of Everything Financial. It seems that Scott Adams, when he’s not writing about life in an office cubical, has quite the financial head on his shoulders. I was pretty happy to find him posting an article on his blog The Problem With the Economy. Ok, maybe it’s not the only problem, but, hey, it’s a good start.

Have a great week.

Joe

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Oct 07

A few weeks ago Mrs. Micah published a post discussing the financial list that you should create for those who leave behind, titled How to Save and Store Critical Financial Information For Your Family. Ever since I read that I’ve been thinking about her post as well as my own On my death, please take a breath. It occurred to me that the financial list Mrs. Mike created would be an excellent place to leave some further instructions to your beneficiaries regarding their inheritance, with an emphasis on the tax aspects of IRAs. This would be a good way to avoid the tragic mistake that I referenced in my earlier post.

Here is an example of what I had in mind;

Dear Rich,
Some of the money that I left you is in an IRA account. Please understand something about this account. When I left it to you there were no taxes due, but because this IRA was funded with pre-tax money, you owe taxes at your marginal rate as you withdraw it. Fortunately, withdrawals can be made based on your current life expectancy, so you can withdraw this money a little bit at a time over the years and hopefully pay very little in taxes along the way. The way the money is currently invested, even though right for me, may not fit with your investing style or needs. If you wish to reduce the stock portion and keep it all and CDs that choice is yours. You can sell the stock and reinvest the money into CDs or even place it a money-market fund and this transaction will not be taxable. It’s only when you withdraw the money from the IRA that you’ll be required to pay taxes. The required minimum distributions that you must take are just that, minimum numbers, if you need to take a bit more it’s your choice to do that as well. Just keep one thing in mind, if you take out too much money in one year you may jump into a higher tax bracket and pay more tax than is necessary. Lastly, the one thing I ask you not to overlook is to include a new beneficiary should something happen to you. Again this is your decision, a child, a friend, a family member, a charity, the choice is yours.
Use it in good health,

Obviously, you can fine tune this to your own style. The message here is that years of your planning can be undone by one mistake your beneficiary makes. Here’s a way to help avoid that.
Joe

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Aug 14

In my first Frugal Friday post three months back, I suggested the first step to take in you path to being frugal is a budgeting tip as well, namely, track all your spending, every cent. Now, a fellow blogger Chloe at Naturally Frugal asks her readers to take the challenge, and perhaps meet some like minded people in the process to share their experience. If you come back looking for the link in a few weeks, it has been added to my sidebar, left, below. Join Chloe’s challenge and let me know how you’re doing on it.

On another note – Today, the guest post I submitted to Moolanomy on the topic of Estate Taxes and the Right Way to Own Insurance was approved for publication. Take a look, it’s a good read and a way to maximize your heir’s inheritance. Do it wrong and it can cost you.

Enjoy the weekend. While I’m still answering at Moolanomy Answers, if you have any topics you’d like to see discussed in depth, a full article, let me know. Always looking for new ideas.

Joe

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Apr 30

Now that you’ve Taken a Breath, and are ready to roll over an IRA you inherited, there are a few important things you must know. Enough that I’ve written a full article, “Inheriting or Bequeathing an IRA” which I suggest you read. I believe the article highlights the importance of properly setting up one’s IRA with named beneficiaries on the account as well as the proper method for those inheriting so as to minimize the tax hit. For a deeper discussion, I recommend the book, “Parlay Your IRA into a Family Fortune” by Ed Slott

Joe

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Apr 28

I recently became aware of a situation that was pretty upsetting, even though it happened to someone I don’t know and never met. A friend of a friend passed away and left her brother a sum of money in a trust. The brother, disabled, and not working, panicked, and took the money out. Now, when I first heard this, I thought that since it was in a trust, he may have some capital gains due, but that should be minimal. What happened was that the trust held the deceased woman’s IRA, so every last cent was taxed as ordinary income. Even though he had no other income, his tax bill was well over $40,000. A peek at Fairmark tells me that in 2008, one can have $8950 income not be taxed at all (this figure is the sum of the single exemption and standard deduction). The next $8025 is taxed at 10%. So this poor soul could have withdrawn $16,975, rising a few hundred each year, and paid about $800 in tax. The interest alone on the $40,000 would pay his taxes each year. It’s unfortunate that he started asking for advice well after the withdrawal was made, as he could have rolled this money into a beneficiary IRA within 60 days of the withdrawal.

The lesson here, when a loved one passes away, take a breath, don’t panic. Mourn, and take some time. Ask questions and understand where the money, stock, real estate is, before making any decisions you are likely to regret. I hope you can learn from this person’s mistake.

Joe

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