by Bezaire, Ledwitz & Associates, APC | Last updated Sep 24, 2020 | Estate Administration, Estate Planning, IRA, Resources, Succesor Trustee, Taxes, Trusts, Weekly Update
In this week’s Estate Planning News, our firm has highlighted the oft-overlooked area of Estate Planning and IRAs. We chose three articles that explain different IRA planning strategies, ideas, and perspectives on how IRAs can and should be used in an Estate Plan. Retirement accounts, in general, are governed by strict regulation and need to be handled carefully by well-informed parties. This digest should arm readers with information to adequately discuss their plans with a qualified professional. If You Are the Surviving Spouse of an IRA Owner – Fidelity.com If you are the spouse of an IRA owner who has named you as his or her beneficiary, it’s critical that you-and the owner of the IRA-understand the rules that govern IRA inheritances. Read More at https://www.fidelity.com/viewpoints/retirement/surviving-spouse-IRA Ed Slott and Company – IRA, Tax, Retirement Planning Articles, Insight Previously, same sex married couples did not have the spousal IRA benefits of opposite-sex married couples under the tax code. These benefits include the ability to make spousal IRA contributions, tax-free splitting of IRAs in a divorce, and spousal rollovers at death. However, the IRS recently issued guidance that gives same-sex married couples the spousal IRA benefits. Read More at http://www.theslottreport.com/2013/09/spousal-ira-rollovers-for-same-sex.html Understanding Who Should Be Beneficiary of Your IRA How To Turn A Modest Tax-Deferred Account Into Millions For Your Family How would you like to turn your modest tax-deferred account into millions for your family? Depending on whom you name as beneficiary, you can keep this money growing tax-deferred for not only your and your spouse’s lifetimes, but also for your children’s or grandchildren’s lifetimes. Read More at... by Bezaire, Ledwitz & Associates, APC | Last updated Feb 22, 2023 | Estate Planning, Same Sex Estate Planning
As we have discussed in previous posts, the impact of the United States v. Windsor case has been broad. This landmark ruling invalidated provisions of the Defense of Marriage Act, paving the way for recognition of same-sex marriages when it comes to federal tax purposes. Earlier this month, the IRS issued Notice 2014-19, expanding the reach of Windsor to federally qualified retirement plans. Prior to this ruling, there was little clarity regarding the IRS’s position on whether same-sex spouses were considered “spouses” in the eyes of a qualified plan—especially in states that do not currently recognize same-sex marriages. Notice 2014-19 dispels any confusion: flatly stating that as far as the IRS is concerned, same-sex spouses are covered by the benefits afforded heterosexual spouses by these retirement plans. Plans that do not currently cover same-sex married spouses will need to be amended to reflect the new, federal guidelines enacted by this notice. Benefits that are now extended to same-sex spouses include survivor annuities, payment of benefits after the death of a spouse, and some employee stock ownership privileges. The Notice also refreshes the reader’s memory about how a same-sex marriage can be recognized by the federal government, stating that the IRS: “adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.” This is a comparison of the two ways same-sex marriages are either recognized or disregarded, the “state of celebration” approach... by Bezaire, Ledwitz & Associates, APC | Last updated Feb 22, 2023 | Estate Planning, Same Sex Estate Planning, Trusts
Recently the United States Supreme Court ruled on United States vs. Windsor—a case that argued the constitutionality of the Defense of Marriage Act (DOMA). DOMA’s Section 3 controversially defined a “marriage,” for federal tax law and benefits, as only between one man and one woman, and defined “spouse” as a person only of the opposite sex. Section 2 of DOMA also stated that states that did not allow same-sex marriages did not have to recognize those marriages from other jurisdictions. The Windsor court struck down Section 3 as unconstitutional—removing it from the statute as though it had never existed. Section 2 was not ruled on, leaving some gray area when it comes to states’ recognition of out-of-state same sex marriages. The IRS, following the decision, was decidedly less equivocal—issuing Revenue Ruling 2013-17, stating that same-sex couples, legally married in a state or foreign jurisdiction that authorizes the marriage, will be treated as married for all federal tax purposes. In California, Hollingsworth v. Perry held that Proposition 8, which banned same-sex marriages in the state, was also unconstitutional—allowing California same-sex couples to join into IRS-recognized valid marriages. Notably, this does not apply to civil unions, registered domestic partnerships, or other non-marital relationships, regardless of what rights or privileges are bestowed upon those types of unions by states. So what does this decision mean for same-sex couples in an Estate Planning context? Prior to the Windsor decision, same-sex couples historically faced challenges to planning their estates, including: Persistent need to define property rights by contract. High chance of Will contests. Difficulty enforcing inheritance rights of adopted children. Simply, the IRS ruling...