It is normal to think that once you retire, you no longer need to save or invest for retirement. Although many may switch from an accumulation to a distribution mindset when retirement starts, it is important to keep your money working for you as much as possible.

One consideration is managing and planning for distributions from tax-favored accounts, such as traditional IRAs. Two big changes occurred for Required Minimum Distributions (RMDs) when the SECURE Act of 2019 was enacted. The first important change was the age for RMDs from 70 1/2 to 72, meaning anyone whose birthday falls on or after July 1, 2019, has until age 72 to take his or her first RMD. The second important change is that the IRS has updated the actuarial tables for RMDs to reflect our increasing lifespans.

The table below compares the factors in the old and new tables for some sample ages. The percentage reduction in the RMD is shown also. 
Source: IRS; M.A. Co.

Some observations:

  • The RMD from a $1 million IRA at age 75 was $43,668 under the old table and will be $40,650 under the new table.
  • Assume a steady 4% total return on a $1 million IRA, with RMDs paid at the end of each year. Before the changes took place, total RMDs paid through age 100 from a $1 million IRA would have come to $1.69 million, and there would be $295,750 left in the account. Under the new table there will be two fewer RMDs by age 100. Total RMDs come to $1.62 million, and there will be $333,858 left in the account. 
  • Under the new table, if the rate of return is boosted to a steady 6%, the RMDs will be paid from income for much longer, the IRA will have an extended period of tax-deferred growth. That $1 million IRA would pay some $2.23 million in total RMDs through age 100, with $606,255 remaining in the account.

The purpose of these changes to RMD rules is to make it less likely that retirees will outlive their money. The RMD is only a minimum; there is no cap on distributions from an IRA during retirement. If you'd like to calculate your RMD for the upcoming year, visit our website https://gstrustco.com/resources/learning/ for a simplified RMD calculator tool.

Ensuring you don't outlive your money during retirement is about more than just knowing how much you can spend and which accounts to draw from. It involves facing new types of first experiences and planning can make things easier.

Beyond conventional trust services, we understand that retirement is a long road with many unexpected bumps and first experiences. Some of them pleasant, such as seeing a grandchild's first steps or making a sizable charitable gift, and others harder to deal with such as finding an assisted living facility. That is why we take our services a step further with Lifestyle management services.
FAMOUS WILL FOR THE MONTH HENRY FONDA
CLICK THE NAME TO READ
CLICK THE NAME TO READ
Henry Jaynes Fonda was an American film and stage actor who had a career that spanned five decades in Hollywood. Henry provided for wife, Shirlee and his daughter, Amy. He made no provision for his other actor children, Jane and Peter. All of his children were from his previous marriage.

In the Informational Article, The Lost Will is a story of a lost will with a happy ending, but care should be taken that wills not be lost. Read in FAQs About Trusts some of the most common questions asked of us as professional trustees.

A little less than 2 weeks ago Punxsutawney Phil's inner circle reported, "We have passed the darkness of night but now see hope and morning's bright light. But now when I turn to see there's a perfect shadow cast of me. Six more weeks of winter there will be!" I, for one, am hoping he is mistaken.

With the waning Omicron wave, just maybe like Bill Murray's character in the Groundhog Day movie, we can stop feeling that we are reliving the same day over and over again.

Sincerely,
Ira J. Brower, Founder
FAQs About Trusts
What do you think of when you hear the words "trust fund"? Many people will associate those words with the Astors, the Rockefellers or the financial titans of the 19th century. Those families did indeed employ trusts for the long-term care of family wealth. But you don't need to have billions to benefit from a trust-based wealth management plan, thanks in part to advances in technology. More and more affluent families these days are exploring the unique financial management and financial protection advantages of trusts. Here are questions that we hear frequently, and our answers.

What is a trust?
A trust is a formal, legal arrangement for the continuing care and management of property. Typically a trust is created when someone transfers money or property to a trustee, either an individual or a trust institution or bank trust department. The trustee holds title to the trust assets and manages the trust fund solely for the benefit of one or more beneficiaries. 

Can the person who creates a trust also be the beneficiary of the trust?
Yes, that is a very common approach. In a typical revocable living trust, a husband and wife might transfer their investment assets to the trustee with the expectation that the trustee will handle their investments for the rest of their lives. The trustee may remit trust income to the couple as needed, or may be authorized to pay their bills directly from the trust.

Can I be my own trustee?
Yes, you can be the trustee of your trust, or you can have a trusted family member be the trustee. But that's not a course we would recommend. Some very important reasons to let us be trustee of your trust are:

  • To gain access to professional management of your assets.
  • To have someone available to stand in your financial shoes should illness or incapacity strike.
  • To provide financial support for your loved ones during your lifetime and beyond.
  • To put all the chores of trust administration into experienced hands.

What's the best age for setting up a trust?
As a practical matter, a great many people first give serious consideration to establishing a trust as they approach retirement, or when they do their estate planning. However, many young entrepreneurs have used trusts for their wealth management once they achieve early success. There really is no "best age."

How is a trust different from other investment accounts?
A trust has an independent legal existence that makes it durable. It can survive the incapacity or death of its creator. The trustee continues to manage the trust according to its stated purposes, stepping into the shoes of the person who created the trust.

If a trust has an independent legal existence, does that mean it must pay income taxes?
In the more usual case, trust income is distributed to the beneficiaries and they pay the taxes. However, if the trust accumulates its income, yes, the trust does pay income taxes, and the tax brackets for trusts are very compressed.

Can I change my mind after I create a trust?
That depends upon what sort of trust we're talking about. A charitable trust is normally irrevocable and can't be modified. A trust in a will can be changed simply by amending the will.

Usually, this question arises about revocable living trusts, and in that case the answer is yes; you remain in full command. You can change the beneficiaries, add assets, withdraw the assets, even terminate the trust should you decide that it is not right for you and your family.

(February 2022)
© 2022 M.A. Co. All rights reserved.
The Lost Will
It's important to have a will, but it's just as important to take steps so that the will is available to heirs after death. Otherwise, it will be ineffective, and the estate will pass by intestacy. Here's an example of the problems that may arise.

Theodore's June 2012 will left his multi-million dollar estate to his life partner, Velma, if she survived him, or to the St. Jude research hospital if she predeceased him, which she did. The estate planning attorney kept the original of that will. An October 2012 will was executed changing only the nominee for executor of the estate. Theodore kept this original himself, as well as a copy of it.

Both wills explicitly disinherited Chip, Theodore's long-estranged son. He specifically asked his estate planner to not get in touch with Chip.

As Theodore's health declined, he was eventually moved into a nursing home and a guardian was appointed for him. His papers were boxed up and followed him. After Theodore died, the guardian was unable to locate the original October 2012 will. She speculated that Theodore had destroyed it, and recommended to the probate court that the estate pass to Chip. When the estate planning attorney learned of this development, she contacted the probate court and St. Jude's to inform them of the existence of the earlier wills. The probate and appellate courts held that the statutory requirements for proving a lost will had not been met.

The Supreme Court of Nevada reversed. Although the original October 2012 will could not be found, it continued to have legal existence until there was proof of its destruction by the testator, which was not here provided. The statute requires that two witnesses have knowledge of the terms of the will, and in this case one witness only could confirm the testator's signature, not the terms. But the terms of the will were uncontested, and failing to probate the lost will in this situation "would create an absurd result of putting an unnecessary and onerous burden on the second witness."

In this case, Theodore's wishes ultimately were respected, and it's not entirely clear what he should have done differently. But those wishes were respected only after much delay and incurring attorneys' fees.

(February 2022)
© 2022 M.A. Co. All rights reserved.
“The Most Challenging Year Taxpayers and Tax Professionals Have Ever Experienced.”
That is how the National Taxpayer Advocate, Erin Collins, characterized the 2021 tax filing year in the Annual Report released January 12. A few of the troubling details:

  • As of the postponed filing deadline of May 17, 2021, the IRS was holding some 35 million tax returns for employee review. Half of those were paper returns awaiting processing, and half were returns that were suspended during processing because of inconsistencies that required review by IRS personnel. Refunds were necessarily delayed.
  • Call volumes tripled in 2021, to 282 million telephone inquiries of the IRS. Unfortunately, the Service was only able to get to 32 million of those callers, about 11%. Nearly 90% of callers could not get through to talk to a person.
  • There were 13 million math errors made by taxpayers on 2020 returns. Many taxpayers were simply baffled by the IRS notices of their mistakes, and could not determine how to make corrections.
  • As of late December, 2021, the IRS had a backlog of 6 million unprocessed individual returns, 2.3 million unprocessed amended returns, 2 million unprocessed employer's quarterly tax returns, and about 5 million pieces of taxpayer correspondence. Some taxpayers have been waiting nine months for their refunds.

The Report was not all bad news, of course. The IRS has been doing more with less, as its workforce has shrunk by 17% since fiscal 2010, while the number of individual return filings has grown by 19%. In addition to tax return processing, the IRS issued 478 million stimulus payments totaling $812 billion, and sent Advance Child Tax Credit payments to 36 million families worth some $93 billion.

(February 2022)
© 2022 M.A. Co. All rights reserved.
Articles of Interest
What makes a good deli? They're not like the ones you'll encounter at your local grocery store. Read More


Anyone with a child or grandchild with a disability needs to pull out their will and make sure the way it's written doesn't unintentionally keep someone they love from the benefits they need. Read More


The secret to a budget-friendly trip? Travel during the off-season. Read More
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2022. All rights reserved.