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Year-end estate planning

January 2019 | Christopher M. Petillo, Eq., CPA, CELA
Perhaps you just digested some holiday turkey and are thinking about getting your estate in order as part of your New Year’s resolutions. Now is a good time to assess the following questions:

#1: Have you taken the Required Minimum Distribution (RMD) from your retirement accounts this year?
If you have not done so, make sure to do so by December 31. You may wish to consider asking your financial institution to send you a monthly distribution of (at least) 1/12 of your RMD for 2019 as well as on a go-forward basis for cash flow purposes.

From an IRA account (not 403(b) or other type of account), you can make a charitable gift using a Qualified Charitable Distribution (QCD) request form without paying tax and also satisfying your RMD for the year as to your IRA.

#2: Have you named beneficiaries on your bank accounts, stocks and brokerage accounts yet?
Many banks will now allow you to name a beneficiary designation on your checking account to avoid probate. You should also consider adding a Transfer on Death (TOD) beneficiary designation to your (non-retirement) brokerage accounts. If you have direct ownership of stock in a company in a Computershare account, you are only allowed one TOD beneficiary per account. This can be a challenge if you intend to have multiple beneficiaries.

Instead of separating the account into several accounts, consider first transferring the stock into a brokerage account and then adding a TOD designation to the brokerage account (brokerage TOD forms typically allow for more than one beneficiary per account).

#3: Did you name a charity as a beneficiary in your Will?
If you have done so, consider instead naming the charity as a beneficiary of a portion of one or more of your retirement accounts. The reason for this is charities do not pay income tax on their inherited distributions; however, your family member/friend would pay income tax.

This also makes your Executor’s job easier as estates with charities as percentage beneficiaries under the Will or Trust must file accountings with the Court and the New York State Attorney General’s Office.

#4: Is the value of your estate above the New York State Estate Tax threshold?
For 2019, the New York State Estate Tax threshold will increase to $5,740,000. This number includes the value of your home, life insurance you own, bank accounts, stocks, bonds, brokerage accounts, retirement accounts, annuities and other property.
Please Note: At the time of print, the Federal government has not yet released the new threshold for 2019; the 2018 Federal threshold was $11,200,000 for estate and gift taxes and $15,000 for the Federal gift tax annual exclusion. Some projections have the Federal number rising to $11, 400,000 for 2019.

#5: Do you own vehicles registered in New York State AND another state (such as Florida)?
Is anyone else a joint owner on the title of the vehicle? Will the vehicle be a probate asset in New York or Florida? If you have an out-of-state vehicle, are you still using it as much as you previously did? New York State allows for one vehicle to pass to the surviving spouse without probate if the value of the car is less than $25,000. If you have more than one vehicle in your name only, you have potential probate assets going through your Will.

If you have any questions about the matters discussed in this article, please contact your Legal Service Plan’s National Legal Office at 800-292-8063 or 631-231-1450.