Issue 9 • February 2008 

February Newsletter

In this issue we take a look at the upcoming $150 billion economic infusion that Congress is working on along with a quick primer on IRA/401k beneficiary rules.

(the following information is for information only - please consult with your tax or legal professional for clarification)

The Emergency $150 billion stimulus package:

As mentioned in the last newsletter the Federal Reserve is doing all it can with monetary policy to prevent a collapse of the economy and now the government will do their part with a stimulus plan. Although the plan is still being debated in Congress, here is what the folks at Kiplinger Tax are predicting:

  • rebates of $1200 for married and $600 for single.
  • taxpayers with children under 17 will get an extra $300 per child.
  • High Incomers won't get checks! Phase out will begin at $150k for marrieds and $75k for singles.
  • Small businesses will be able to expense $250k of assets instead of depreciating them.
  • Small businesses can also look for a bonus first-year depreciation of 50% for purchases in 2008 that aren't expensed.

We should hear something from Congress by the end of this month. Just don't look for your checks until mid-summer!

Understanding IRA/401k Beneficiary options:

Did you know that beneficiaries listed on a IRA or 401k supercede what you may have in your Will? IRA's and 401k's are very similar to life insurance in how they pass to a beneficiary. They generally move outside of probate, which is the legal process of settling an estate.

You may have heard of the term "stretch" IRA. This is simply leaving an IRA intact as a tax deferred vehicle to a beneficiary so that it can grow and compound for many years.

Why should you care?

If you fail to have beneficiaries properly notated on an IRA or 401k account the entire account could be distributed to your estate leaving a nasty tax bill and the inability of beneficiaries to take advantage of tax deferred growth. The flip side is that default beneficiary options in your IRA paperwork may distribute the account differently than you planned in your estate.

What should you do?:

  • make sure you have a designated beneficiary ( a living person) on your account. Even consider secondary beneficiaries.
  • If you have a non-designated beneficiary such as a trust, be careful that the trust satisfies certain special rules that allow for stretch distributions based on the life of the oldest trust beneficiary.
  • Check with your 401k provider to see if they allow non-spouse beneficiaries the ability to roll proceeds into an inherited IRA versus taking an immediate taxable payout.
  • If you inherit an IRA make sure that the account maintains proper titling. The IRS is very picky about the wording. (this applies to non-spouse beneficiaries)

More importantly make sure when setting up your estate plan that you make your attorney aware of your accounts and beneficiaries. This could save your family taxes and frustration in settling the estate.


James A. Daniel,

This newsletter if for informational purposes only. The information contained within should not be considered as financial advice nor soliciation for financial services. Consult with your financial professional if you have any questions.

The Advisory Firm, LLC is a fee-only financial planning company and registered investment advisor.

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