Ed Slott is an author who writes about retirement plans. His primary focus is how to "stretch out" an IRA for heirs after the account owner’s death. This is a worthy topic. Far too many heirs "time bomb" an inherited IRA account (meaning they withdraw all of the money and owe income tax on it, rather than leaving it in the IRA to grow tax deferred for years in the IRA. "Your Complete Retirement Planning Roadmap"  is a worthy effort and goes into detail on how to structure your IRA beneficiary designations to allow for maximum income tax deferral. It has a good section on how (and how not to) to make your trust the beneficiary of your IRA. A lot of the book consists of worksheets. I would suggest checking this one out at the library rather than buying it. It is good basic information for anyone with a large IRA account.

Many clients have condos in Florida, but their primary residence is here in the northwest suburbs of Chicago. Of that group, some choose to become Florida residents and change their "domicile" to Florida.

New York attorney Allan Lipman has put together a nice on-line audio seminar that explains many of the issues that surround making Florida your residence. While he mainly covers New Yorkers with condos in Florida, the concept is the same for Illinois residents. Give it a listen if you are considering making Florida your tax and voting "home."

Click the icon below to view a 10 minute screencast on the differences between wills and living trusts (from the safety of your computer).

This summer, a new law was passed that allows those over 70.5 years old to give up to $100,000.00 directly from their IRA account to charity. This is called a "charitable rollover."

Here’s a quick breakdown of what you need to know about this:

1. It only applies to those over age 70.5.

2. It only applies to IRA accounts (not a 401k, 403b, SEP, profit sharing or pensions). If your money is in one of those type of accounts you can roll over your funds to an IRA, then donate.

3. DO: Donations must go straight to the charity (not to a donor advised fund or foundation). DON’T: You cannot get a check from your IRA then give it to the charity.

4. The donated funds can’t be deducted as a charitable donation on the giver’s tax return.  However,  the money given to the charity from the IRA is not included as income.

Charities are very happy with this new provision and it can be a great way to reduce your estate and benefit your favorite charity. For more detail.

This Tribune article confirms my experience. Annuities are often sold to elderly client who don’t understand them. Annuities have their place, but not for older folks who pay no income tax.

Several ultra-wealthy families were behind a lobbying campaign to eliminate the estate tax. They tried to "keep it quiet," but citizen.org issued a report found out about it.

IRS recently approved Roth 401ks. Employers have to amend their 401k plans to allow for them. Distributions can be taken at age 59.5 and must begin at 70.5 years old or on death or disability. The funds must be in the Roth 401k for five years before they can be distributed without penalty. All earnings on the account are tax free.

The maximum in all 401ks for 2006 $15,000.00, or $20,000.00 if you are over age 50.

These look like a great opportunity, especially for high income earners who don’t qualify for a Roth IRA.

There is an Illinois inheritance tax. Watch out for it, because it takes a bite from large estates. I just finihsed working on an estate for a client of mine who died in 2005 with an estate of 2.0 million. His children owed $180,000 to IRS and $91,000 to the state of Illinois. The first $1.5 million of his estate was not taxed because that was the tax-free amount in 2005. So, only $500,000 of the estate was subject to tax and Illinois took almost 20% of that!

For 2006, the Illinois tax will affect those estates greater than $2.0 million any stays there until 2010 when there is no Illinois inheritance tax (or federal tax) for 1 year. Then, in 2011 the Illinois inheritance tax will affect those estates of $1 million or more. The Illinois attorney general’s web site explains this messy situation.

The solutions to this problem: Make Florida your residence if you can. It has no "state" estate tax. Try to reduce your estate to under $2.0 million with proper estate planning. GRATs, QPRTs and ILITs can help reduce large estates.