The benefits of converting part of your 401(k) to gold

By David Matthews

Using your 401(k) funds wisely will allow you to have the most ideal retirement possible. After a few successful investments you could earn enough profit to make a down payment on a beautiful property and take an amazing vacation as soon as you’re able to walk away from your job. On the other hand, if you leave your 401(k) funds untouched and let them depreciate along with the value of the dollar, you’ll probably have a lacklustre retirement, living month to month off of a substandard income that isn’t much better than the revenue you were generating as part of the workforce. Make your retirement worth the wait by taking advantage of the following 3 benefits of converting part of your 401(k) to gold.

Cashing in on the Gold Boom

As the global economy continues to struggle more inventors are buying gold to safeguard their assets, resulting in a higher demand. Mining companies are expanding their operations in order to keep up with the supply, increasing their cost of operations, and since gold is finite resource the supply is ever-dwindling. Rising demand and decreasing supply is contributing to gold’s continual rise in value and is setting up a situation that will probably make thousands of smart investors very rich. If your current 401(k) plan with your employer allows for gold investments you can initiate the process very easily. If not, all you need to do is open an IRA and rollover some of the funds in your 401(k) into the new IRA account to begin investing.

Increased retirement funding

At the moment your 401k fund is a bit like a fireplace mantle, it is sitting there collecting dust until you’re able to use it. If you choose to withdraw it early you’ll have to pay a 10 percent early withdrawal fee, and you’ll also have to face other taxes and penalties depending on the situation. However, you can choose to put those funds to good use right now without withdrawing them by investing in gold and capitalizing on the inevitable gold boom. Imagine being able to buy whatever you want and living like you’re permanently on vacation! This is the type of lifestyle you can have during retirement if you take advantage of the gold boom and buy a large amount of gold before the price peak occurs during the next decade.

Portfolio protection

Instead of investing in risky instruments like stocks, exchange-traded funds (ETFs), or mutual funds, consider the advantages of securing a portion of your retirement investment portfolio by purchasing gold with it. Once you have the gold bullion in your possession, or stored in an online holdings account, you can be sure that those assets will not depreciate over time. In fact, your funds will most likely continue to grow until the price of gold peaks between 2015 and 2020. Essentially, investing in gold lets you protect your retirement form mediocrity by safeguarding a percentage of your portfolio from depreciation and facilitating optimal returns.

David Matthews is a 401(k) investment specialist and retirement advisor who conducts market analysis and writes for Gold-401k.org.

Social Security's unknown future and 401(k) investing

One of the great political questions of our day is whether or not Social Security can be saved, and if so, how?

 

There are many competing voices in the press, from financial advisors, the elected officials on Capitol Hill, and other politicians, about what is the best solution for the ills that plague this government institutionalized program that began under President Franklin D. Roosevelt. It is crisis time for many Americans who depend on their monthly disbursements, and all they want is a reasonable and sustainable solution that will guarantee them that the money they were forced to place in this system actually returns to them.

 

What was Social Security supposed to provide?

Many millions of Americans rely on social security benefits to meet their monthly financial needs, and most aren’t swinging from grand chandeliers in palaces of gold. Social security was never intended to be the sole providers of retirement income. In the past, family members, churches, and communities banded together to take care of the aged members of society.

Over time, since the Great Depression, the government saw and took an opportunity to tell people that they were unable to save, invest, and provide for themselves.  Instead, the government would take part of their income and sock it away until one turned 64 and they then would get their money back in monthly increments. This is not an investment but a taxation, mind you. Congress has used this money for years for other purposes, radically depleting the social security account our nation is supposed to maintain. Both major political parties have varying solutions to the problem without confessing that they are the problem. It has become a piggy bank that simply does not get repaid. “Just print more money,” seems to be their mantra.

 

Affect of the Babyboomers 

Now with our aging population, suddenly concerns about the veracity and sustainability of social security have come to the forefront of political talk and rightfully so, our population is worried.

For many who have seen their 401(k) accounts melt away in the radiant remains of the current economic downturn, their government check each month has increased in value and importance to them. New strategies have had to be employed as worry and fear about being able to continue a certain quality of life have run head on into the reality of their former dreams and goals about retirement.

 

Hope is still alive

Still, opportunities exist for those who are seeking to rebuild their 401(k) so they are able to still fulfill their retirement dreams and goals, but it will take finding the right financial advisor. Rock Hill retirement planner Matthew Griffin suggests that relying on your company’s 401(k) manager is not wise because their job is not to help you plan for your future and they typically are not investment experts.  This new era requires a steady and sober approach to the marketplace if one is to rebuild their accounts and get back on course. He also suggests that people under 40, who still have more time to rebuild than those who are older, should not allow that extra time to make them unworried.

Griffin suggests you take hold of the freedom we have to be more in control of your economic future, especially since social security may not be around by the time that age group retires. It is less about being aggressive in the marketplace than being wise with your future. Let your money work for you. Regardless of what plan Congress finally decides on, social security will never match private sector growth (or the potential of its losses) but with a little help from a financial advisor, you can climb the mountain of your future goals with confidence and hope. 

Revenflo Web Team: A team of SEO writers dedicated to making the internet a better place

5 fun ways to spend your retirement more sensibly

By Samantha

You invested your life, energy and time to help build a business, serve in the military or work as a law enforcement officer. Now that you have retired, it is your time to get your life back in your hands. Even though you loved what you did, your retirement is all about spending time doing what you love with the people you love.

To do that usually takes some money. With reports on the news each day on the down state of the economy, you may be wondering whether or not it is reasonable to spend your pension or if you should save it for a rainy day. While saving money is a wise choice, depending on how you spend your money, you could be making an investment for the future without even realizing it. For this reason, many people take out loans from online companies such as www.uspensionfunding.com to help them fund their golden years.

Here are a few fun ways you can spend your retirement money sensibly.

1. Do volunteer work.

Just because you have retired does not mean you will want to sit at home without socializing with other people. Volunteer work is a great way to get out and help a local charity while entertaining yourself with others who are just as passionate about life as you are. It is also a great way to save money.

2. Visit distant relatives.

Combine your love of travel with the comfort and fun of being close to your children and grandchildren. You will likely have a free place to stay and can spend time with the people you love without spending a lot of money.

3. Invest in a local business.

If you have always had a passion for business but were unsure how to get involved, use your loan to invest in a business in your area. You will not only be putting your money to good use, but you will also have a great opportunity to earn a return off of it.

4. Treat yourself to a nice dinner.

You may have pinched pennies during your youth, but now that you have your retirement, treat yourself to some fine dining every once in a while. This is a great way to explore new restaurants in your area and a good excuse to get together with friends.

5. Take a cruise.

Cruise liners are lowering their prices and making it far more affordable to enjoy some luxury on the open seas. This is a perfect chance for you to travel the world without overspending.

Your golden years belong to you, and to get the most out of it, you should live it up while you have your health. Use these tips to make sensible retirement decisions and still have fun.

Samantha really enjoys writing and one of her favorite things to write about happens to be finances. If you'd like to learn more about www.uspensionfunding.com, please visit http://www.uspensionfunding.com/

Why 401(k) plans with index funds can benefit employees

The New York Times reports 401(k) plan administrators are reluctant to incorporate index funds into their 401(k) plans. This is because the fees generated by mutual funds provide more income for fund managers. This may be a violation of fiduciary responsibility however, and disadvantage employees. There are multiple benefits to 401(k) retirement plans with index fund options can offer, this article provides a few of those reasons.

Complete article link: http://www.helium.com/items/2157731-reasons-401k-retirment-plans-should-invest-in-index-funds

How to open an IRA

Opening an Individual Retirement Account is a retirement planning decision. Depending on whether or not your IRA is a traditional, Roth or Simple IRA, opening an IRA can be subject to specific differences in regulation. To open a traditional or Roth IRA for a specific year usually requires 1) an application, 2) IRA disclosure terms, 3) an initial deposit, and 4) funding before the annual April, 15th tax deadline.

Where to find an IRA

IRAs are opened through IRS sanctioned financial institutions or 'custodians' that hold and maintain the account. Depending on the type of IRA, establishing the account may be a direct procedure between you and a financial institution or insurance company or via a third party such as an employer or financial planner. Financial Institutions are often eager to help with setting up an IRA. This can lead to considerable diversity in the products, services and costs associated with owning an IRA.

When choosing to open an IRA, looking for the option with the most financial potential helps optimize your retirement planning. Many financial institutions offer IRAs, however fees, investment products and maintenance can differ significantly between account custodians. For example, an insurance company IRA may have different reporting procedures and fees than a self-directed IRA through a brokerage firm.

How to qualify for an IRA

To qualify for a traditional IRA, which is not the same as a Roth IRA or Simple IRA, you must also meet the IRS requirements that include 1) having earned taxable income for all years that the IRA is invested in, and 2) being under the 70.5 year age limit for traditional IRAs. IRAs can be funded with any amount of value up to the annual contribution limit and within the minimum deposit parameters allowed by the IRA custodian.

In the case of employer funded IRAs such as a Simplified Employee Pension IRA your employer will be required to submit additional documentation such as an IRS Form 5305-Sep to the IRS. Individual Retirement Accounts can be rolled over, but must meet IRS authorized criterion. To find out if your IRA rollover is allowable contacting the IRS directly is a good way to find out. Sometimes an IRA may receive direct deposits of assets such as mutual fund shares held within another account.

The different types of IRAs

The differences between each type of IRA are relevant when determining how to open an IRA. For example, a Roth IRA is contributed to with taxable income and has no opening age limit whereas money placed into a traditional IRA is deductible from taxable income and can only be done so up to age 70.5. For an employer IRA such as a Simple IRA, funds are placed into the IRA before being paid out to an employee. Other variations include when withdrawals are required for traditional IRAs and annual contribution matching in the case of Simple IRAs.

Roth IRAs, unlike Traditional IRAs have income restrictions and cannot be funded if your Adjusted Gross Income is beyond the contribution cap. Married couples are allowed to have individual IRAs making the maximum contribution double per married household provided income limitations are met. Allowable annual payments to IRAs vary according to income, and tax filing status.

Pros and cons of moving to Panama

Panama has a lower cost of living than more expensive countries, yet at the same time has good health care and retirement friendly government policies. The pros and cons of moving to Panama vary with one's retirement objectives, but there are some aspects of Panamanian living that are well worth considering if planning a retirement there. 'International Living Magazine' ranked Panama with a score of 71 for Quality of Living in 2010; France was the highest with 82.

Panama is a country with approximately 3.41 million people and according to the CIA World Factbook, and near the size of South Carolina in size. Panama has a welcoming retirement visa program and infrastructure that is able to support a high standard of living at a fraction of the price.

Pros of moving to Panama

The benefits of Panamanian retirement may particularly suit cash strapped retirees with monthly retirement income of $750-$1000. Panama is located in central America with a warm climate with lots of beach front and access to both the Pacific and Caribbean sea. Panama is known for its canal and tax shelters. A few of the pros of moving to Panama for retirement are listed below:

• 'Pensionados' visa and national benefit plan

The Pensionados national visa and benefit plan of Panama allows qualifying foreigners discounts of up to 50% for a wide variety of services including medical, transportation, financial services and entertainment. As of 2010, International living states that to qualify as a Pensionado, one must receive a qualified monthly retirement income of $1000 or $750 if at least $100,000 of real estate is purchased.

 • Tax sheltered investments and tax free income

Retiring in Panama means no income tax of 'foreign earned income' which is a huge benefit to retirees with limited income. Additionally, property tax on newly constructed real estate may qualify for property tax exemption according to the Embassy of Panama. Panama is also a tax shelter with several protective laws for international corporations and individuals alike.

• Low cost of living

In addition to having a stable currency pegged to the U.S. Dollar, which is also used as currency, Panama has a lower cost of living than the U.S. According to MSN Moneycentral, a 2000 square foot home can be constructed for approximately $80,000; this doesn't include the generous property tax exemptions on the property.

• High quality health care

According to the Panamanian Embassy, health care in Panama is among the best in Latin America and health insurance through Panamanian companies is more affordable than American insurance.

• Standard of living

A U.S. standard of living in Panama is available through its service orientated economy and costs less than the same services would in the U.S. Food and drinks cost much less than in the U.S. making life there financially cost effective for U.S. retirees.  Major Panamanian cities are well developed with access to many amenities, and services.

Also according to MSN Money Central, the crime rate in Panama is lower than Costa Rica which is considered to have a strong policing environment. This would make the relative safety of Panama relatively considerable.

• Convenient location to U.S.

If you are an American considering retirement in Panama, the travel time by air is approximately 3-5 hours from continental U.S. and direct flights from several large U.S. cities such as Washington D.C., Los Angeles, Houston, Miami and Orlando.

Cons of moving to Panama

As with any country, it is unrealistic to presume retirement in Panama is paradise 100 percent of the time. Panama does have its characteristics and issues, some of which may dissuade some from retiring there. A few potential cons of moving to Panama are described below.

• Pollution

Pollution in Panama is also a problem, air pollution in urban centers such as Panama city can be unpleasant to some. Other forms of pollution related to waste management are also a concern for Panama and may have some impact on quality of life.

• Humidity

The climate in Panama is warm, but it is also humid, hot and has a long rainy season. Unless one plans on living at higher altitudes where access to services may not be available, there will be hot and sticky days in the forecast.

• Poverty

According to the World Health Organization, Poverty in Panama means access to services considered standard in the U.S. is not necessarily available. This includes clean water, secondary school education, and nutrition. Retirees in Panama can expect to encounter such poverty either directly or indirectly.

• Economy

While not directly related to retirement in Panama, Panama's economy is small and can affect life there in terms of some standards of living. The annual GDP of Panama is less than the size of Microsoft Corporations 2009 annual revenue indicating national wealth is not among the highest in the world. This is also what allows the cost of living to be lower for American retirees however.

Sources:

1. http://bit.ly/9cv9iV (Embassy of Panama)
2. http://bit.ly/cCgR7e (International Living)
3. http://bit.ly/zgEkd (CIA World Factbook)
4. http://bit.ly/a0Eslh (MSN Money)
5. http://bit.ly/bPU3Sf (World Health Organization)

What to do if you lose your Social Security Card

To replace a lost or stolen Social Security Card is a similar process to applying for a U.S. Passport, but without the fee. An application, and a minimum of two items of documentation proving identity and citizenship status are required to be mailed or delivered in person to a local Social Security Office. The application is processed through this office and then if approved, a replacement card will be issued. Social Security offices can be found using the Social Security Office locator.

The Social Security Agency requires all documents submitted with a replacement Social Security Card application to be either originals or copies certified by the issuing agency. For example, if a driver’s license is submitted to prove identity, a copy of that license must be certified as authentic by the Department of Motor Vehicles. Original documents are returned to the applicant after the replacement Taxpayer ID Card is issued. Non-citizen Adults are required to provide authentic work and immigration related documentation.

Typical documents requested include drivers license, U.S. passport, residency card, birth and naturalization certificates. The Social Security Agency may verify some documents with other government agencies such as the Department of Homeland Security. Non-expired identity documentation with name, age and a recent photograph of the applicant does not necessarily have to be government issued, however citizenship documentation must be government issued.   

The replacement card issuance takes approximately 7-14 days after having processed the application according to the Social Security Agency. The application processing time is not specified so it may be safe to assume as long as a month with processing. By calling 1-800-772-1213, from 7:00 a.m.-7:00 p.m. on weekdays, applicants can check the processing status of their replacement card. Calling during off peak hours is also recommended.

Since a Social Security Card is an important personal document, the Social Security Agency recommends also filing a complaint with the Federal Trade Commission (FTC) and the Internal Crime Complaint Center if the card is stolen. Checking the accuracy of annual Social Security Statements is also advised The Social Security Agency itself states it does not need to be informed of theft if the Social Security Card is stolen.

Social Security Cards may also need to be replaced in the case of marriage or name change to reflect one’s new legal identity. In such case, the risk of identity theft is not as high as when the Taxpayer ID Card is lost or stolen. When changing name for marriage or other purposes, an application is also required, however different documentation is also required to verify the legality of the name change. For example, a marriage certificate to confirm change of last name.

To avoid potential loss or theft several preventive techniques can be utilized. For example, Social Security Cards are often not required for daily activities, but rather during government or employment background checks. For this reason, not carrying a Social Security Card can be a good idea to protect the card from wear and tear, and to protect identity in the case one’s purse or wallet does get stolen. Keeping the card in safe, well-protected place when it is not being carried also protects it from further loss or damage.

Source:  http://tinyurl.com/4q29esl (Social Security Online)

A Guide to elective deferrals and annual additions for a 403(b) plan

A 403(b) is a type of retirement plan similar to a 401(k) except 403(b) are used for non-profit organizations and some government institutions. The statutory code governing 403(b) retirement plans is contained within Title 26 of the U.S. Code. The Internal Revenue Service (IRS) forms regulations and rulings in accordance with the code to guide employers and employees with the administration and management of these retirement plans.

• Elective deferrals

An elective deferral is the part of an employee's income that is withheld for contribution to a 403(b) plan. This amount is considered pre-taxed income and does not become taxable until withdrawal from the 403(b) retirement plan. The affect on the tax payer is a lower taxable income for every year of employment in which an elective deferral is made. The IRS states the maximum limit for 2010 elective deferrals is generally $16,500.

• Annual additions

According to the Internal Revenue Service, contributions to a 403(b) can also be made after tax and by employer contributions such as matching programs. These annual additions are termed non-elective and after-tax contributions. Both elective deferrals and other annual additions to a 403(b) retirement plan are subject to what is called the Maximum Amount Contributable (MAC)

• Maximum contributions

In 2010, the maximum 403(b) contribution amount is $49,000. This amount includes all types of contributions including employer determined elective deferral limits and any additional 403(b) accounts an employee may have. Long time service employees may be granted higher additions i.e. 15 years plus, and catch up contributions may be allowable for persons over 50 years of age.

• Roth 403(b) plans

Another kind of 403(b) is the Roth 403(b). Since Roth accounts are contributed to using after tax dollars accounts, the money in these accounts should be managed separately per the IRS. The maximum contribution to a Roth 403(b) may be higher than a Roth IRA as the IRS states the allowable contribution amount is the total elective deferral amount allowed minus any non-Roth elective deferrals. This means if no regular 403(b) elective deferral contributions are made, then the total amount could be as high as $16,500 if not higher.

• Return on 403(b) deferrals and additions

403(b) accounts can grow in varied ways due to different investment plans. A choice of risk levels may also be chosen via the financial products offered through the 403(b). For example, the U.S. Securities and Exchange Commission (SEC) claims four types of investment plans exist for 403(b) accounts. These include fixed rates of interest, investment linked annuities, mutual fund 403(b) plans,  and minimum return stock index based retirement plans.

Sources: 

1. http://bit.ly/bcUt9J (Cornell University Law School)
2. http://bit.ly/8Y4v1x (IRS: Publication 571)
3. http://bit.ly/cPYWT9 (IRS: MAC)
4. http://bit.ly/dfTKm6 (Securities and Exchange Commission)

How to acquire 401(k) loans

A 401(k) loan is literally a loan borrowed from a 401(k) retirement plan. Since 401(k)s are managed retirement plans, and regulated by the U.S. Department of Labor, the policies implemented by 401(k) managers tend not to vary excessively. To obtain and retain a 401(k) loan, one should be employed, have an existing 401(k) with more than $1000.00 and remain employed at the organization for which the loan is managed until the loan is paid off.

Application for a 401k loan

Obtaining a 401(k) loan is easier than obtaining home equity loans because the money is not coming from a bank but rather from liquid personal assets. The application process is fairly easy and shouldn't involve a credit check, supporting loan application documents and lengthy loan application review. Essentially the process of obtaining a 401(k) loan can take place in 4 easy steps.

1. Contact employer department responsible for 401(k) registrations

2. Ask about 401(k) borrowing terms and agreements

3. Apply either online or through the 401(k) management firm

4. Receive funds either via check or electronic transfer

In the case of 401(k) managers who do not allow 401(k) loans, there is a regulation that allows loans to be taken against the retirement plan under circumstances of need. Since specific criteria are needed for these hardship loans, they may involve extra documentation to verify the loans are in fact needed and cannot be obtained elsewhere. The hardship need may or may not be difficult to prove to the 401K manager. (about.com)

401k loan terms

As with many loans, 401(k) loans have specific terms of agreement as determined by regulation and 401(k) manager's policy regarding the loans and in accordance with regulations pertaining to 401(k) loans. Many 401(k) loan terms are standardized and include similar features such as those listed below. The website www.research401k.com and other 401(k) related sites illustrate the terms of these loans, some of which are listed below.

• Loans must be repaid before distributions can be made
• Up to 5 years to repay the loan without pre-payment penalty
• Interest payments made to self
• Up to 50% of account value can be borrowed
• Loan payments deducted from employer pay (after payroll tax)
• $1000-$50,000 borrowing limits
• No distribution tax on loan funds received if paid prior to end of 5th year

Many financial advisors and much financial literature advise against the use of 401(k) loans because of the duplicated losses incurred by the loans. More specifically, interest and/or appreciation is lost in the 401(k) itself, and the difference between pre-tax and after-tax income is lost when repaying the loan (moneycentral.com). In other words, since 401(k) deposits are made with pre-tax earnings, this lowers one's taxable income and increases one's income leverage. When after tax income is used to pay off the 401(k) loan, income leverage is reduced. Additionally, retirement plans are generally best left untouched as the habit of borrowing from one's retirement can become costly if repeated and relied upon.

That said, 401(k)'s are a quick source of financing for emergencies that don't require as much procedure as a home equity loan. The interest is usually around half to two thirds lower than a credit card and when you pay the loan back you're paying yourself and regain some of the appreciation lost from the 401(k) loan. (forbes.com) 401(k) loans are useful as an alternative source of financing

Summary

401(k) loans are made against one's employee retirement savings plan known as a 401(k). These loans are simply acquired through the 401(k) administrator if their policy allows such loans against the 401(k) plan. 401(k) loans are a quick source of capital at an interest rate lower than credit cards, title loans and collateralized loans because 1) interest on the loan is returned to the 401K and 2) the interest rate on 401(k)'s does not far exceed the prime rate which is a key lending rate charged by banks.

401(k) loans may not be an offered service from all 401(k) administrators so it is important to understand the terms of the retirement plan in the case of anticipated and non-anticipated future 401(k) loan needs. The amount of 401(k) loans are capped at $50, 000.00 and do not have penalty or direct cost other than lost pre-tax income leverage and 401(k) appreciation. 401(k) loans may consequently be relatively cost effective financing and useful up until a point after which alternate source of financing may be required.

Sources:

1.http://invest-faq.com/cbc/ret-plan-401k.html
2.http://www.research401k.com/401k-loans.html
3.http://moneycentral.msn.com/articles/retire/basics/4714.asp
4.http://www.forbes.com/2008/09/02/401k-loan-borrowing-pf-education-in_rw_0902investopedia_inl.html
5.http://beginnersinvest.about.com/od/401k/a/aa122104a_3.htm

Estate Planning Tips for California Residents

Image attribution: Arkyan. GFDL, CC BY-SA 3.0

Estate planning tips for California include those aspects of estate planning that may benefit either the estate planner or the inheritors of the estate. Determining the benefits of estate planning first involves defining the objectives of the estate in order for specific actions to take place to meet those goals.

In other words, in order to provide detailed estate planning tips, one must first know the intent of the estate. That said, this article will illustrate certain aspects of estate planning regarding California that may be of benefit or interest to the estate planner or estate beneficiaries. It will do so in three parts consisting of California estate planning tips, distribution via probate, and relevant references.

California estate planning tips

To plan an estate involves defining its objectives, after which techniques can be applied to the estate's and/or beneficiaries benefit and in accordance with financial and regulatory limitations and options. These tips can vary depending on the size of the estate, type of assets in the estate, complexity of the estate's goals, health and family of the estate planner etc. In California, some items to consider in regard to estate planning are listed below.

• A California State Tax Return is NOT required for Estate holders who die after 2004 as per California State Controller (7)

•A Grantor Retained Annuity Trust (GRAT) may reduce tax on inherited income (5)

•Family Limited Partnership may not be helpful in cases of favorable creditor rulings (8)

• California Gift tax does not apply to spouses of the estate holder (9)

• California probate, civil and other relevant legal code may supersede living Will (2)

• No inheritance tax is due from new California estate beneficiaries (7)

As evident from the points above, there are many nuances to estate planning in California as with any State. Due to the many potentially relevant laws, codes or requirements, California estate planning may best be achieved with the assistance of a qualified estate planner, accountant or attorney.

California estate distribution tips

The California probate process can take anywhere from 6 months to 21 months depending on the case and the circumstances. This California probate diagram illustrates an example of one California County's probate process from start to finish. However, in some instances, particularly when an estate's value is low, the probate process may be reduced in length or requirements.

http://www.scselfservice.org/probate/prop/process.htm

A couple of interesting points in the California probate code are 1) the surviving spouse of the estate holder's legal right to contest the will in some cases of real property and 2) the legal right of family members and interested persons to file petition for information regarding the will of the deceased.

In other words, there is at least one instance in the California probate code in which a spouse can contest a valid will, and where information regarding the estate can be requested from persons not involved with the probate. The above points are further elaborated below with legal code or related links.

(1) Spousal contest of estate will:

According to California's probate code, section 120, the spouse of the deceased can "elect" to take a "portion" of real property if such property is not jointly owned and allocated otherwise in the deceased's will if the deceased lived out of State but owned property in California.

http://caselaw.lp.findlaw.com/cacodes/prob/120.html

(2) Heirs may file a petition to determine beneficiary status of real property

California probate code 248-249.8 also states that heirs not entitled to real property via succession may request information regarding the will of the deceased via petition.

http://caselaw.lp.findlaw.com/cacodes/prob/248-249.8.html

(3) Probate can be simplified in some cases when estate values are under a certain amount

In some counties, estates valued below an amount determined by the State and/or County may bypass the probate process via filing of an affidavit with the county court.

Useful California estate planning references

The following is a list of references both used in the creation of this article and potentially useful for the estate planner or reader. These references include information on California estate laws, taxes, and other references in addition to general estate planning instruments. The references are categorized as such for quicker location of information and are numbered in accordance with numbered references within the article.

California probate law:

1) http://www.megalaw.com/ca/top/caprobate.php
2) http://caselaw.lp.findlaw.com/cacodes/prob.html

California taxes:

3) http://www.retirementliving.com/RLstate1.html
4) http://www.bankrate.com/brm/itax/edit/state/profiles/state_tax_Cal.asp

Estate planning techniques:

5) http://library.findlaw.com/2002/Sep/1/130768.html
6) http://www.dsbcpas.com/estatetaxplanning/estateplanningtech.html
Additional California estate references:

7) http://www.sco.ca.gov/ardtax_estate_tax.html
8) http://www.rjmintz.com/ownership-spouse.html
9) http://www.taxes.ca.gov/Income_Tax/specialind.shtml

Disclaimer: The above content is provided for informational purposes only and does not replace the advice of a certified financial planner, accountant or attorney. The information herein is to be used at the reader's discretion and the author assumes no liability for any consequences associated from such.

How to rollover a 401(k) into a rollover IRA

Rolling over a 401(k) retirement plan is a process by which assets within an employer 401(k) retirement plan are placed into another account, specifically an Individual Retirement Account (IRA). Since there are variations in 401(k)'s and IRA's, in addition to variance in personal financial circumstances, it is important to realize not all 401(k)'s can be rolled over, or rolled over in the same way.

Image source: Internal Revenue Service

This article will outline key aspects of the 401(k) rollover process, and the steps involved in the 401(k) rollover. Essentially, the rollover of a 401(k) into an IRA can be comprised of 5 steps, each of which have sub-steps within them, those steps are as follows.

Step 1: Determine if the 401(k) is qualified
Step 2: Become aware of rollover options
Step 3: Choose type of rollover and IRA
Step 4: Complete rollover and/or distribution forms
Step 5: Tax reporting

1. Qualified vs Non-Qualified Rollovers

Qualified 401k's can be rolled over into both Roth and Traditional IRA's however Roth 401(k)'s may not be rolled over into a traditional IRA. Thus, the first step in rolling over a 401(k) is to determine if the 401(k) qualifies for the rollover. Some of the rollover options available are listed below and viewable at the following IRS rollover chart:

• 401K to Roth 401(k)
• 401K to SEP-IRA
• 401K to traditional or Roth IRA

Even if the 401(k) is eligible for rollover, certain conditions such as age, amount of rollover, and nationality may apply. For example, if the employee seeking the rollover is above age 59.5 years of age, a distribution may be required by law and the terms of the IRA. Rules for 401(k) rollovers are determined by Title 26 of the US Code and enforced by the Internal Revenue Service. The 401(k) plan itself can also determine the extent and possibility of rollover into an IRA.

2. Rollover asset management options

Rollover IRA's are available from many organizations and/or financial institutions. If you are moving from one employer to another, the rollover may be from a 401(k) to an employer Roth 401(k). In other instances, the rollover may be from a 401(k) into an individually managed IRA. Rollover asset management options include the following:

• Employer to employer
• Employer to Insurer
• Personal business to financial institution
• Employer to Financial Institution (institutionally managed)
• Employer to Financial Institution (individually managed)

3. Type of Rollover

After choosing an IRA, there are two types of rollover, 1) direct and 2) distribution. In a direct rollover, the rollover is coordinated between your employer/401(k) manager, and the IRA manager. This method avoids the possibility of tax penalty from distribution outside the 60 day period allowed for distributions to be rolled over.

In a rollover distribution, the employee has more control over the process, but is also more responsible for ensuring the completion of the rollover. In some cases assets may be transferred from a 401(k) without having to be sold, however, in other cases cash only rollovers may be required.

4. Complete rollover and/or distribution forms

This step is somewhat self-explanatory. To execute the rollover, legal documentation has to be completed and forms are provided by the employer and IRA account issuer in order to complete this process. Some examples of 401(k) rollover forms include identity confirmation documents, IRA application and transfer receipt forms, employer authorization forms, and employee transfer authorization form.

5. Tax reporting:

As per the IRS, some 401(k) rollovers must be reported as income on tax returns in the pension and annuity line of your tax return which is comprised of an a and b box. In the a box indicate the gross amount of the rollover, however in line B of the IRS Form 1040, the value should be $0 if no other pension or annuity income is received.

Next to the b box value place the words rollover next to it so that the rollover is not taxed. In the 2008 IRS Form 1040, the pension and annuity line is within the income section of the form on line 16. For more details specific to an individual tax situation consult the IRS or a tax preparer.

In summary, 401(k) rollovers to IRA's are fairly straightforward but do require certain conditions to be met in order for the rollover to take place. These conditions are determined by the 401(k) type and policy, in addition to the regulations implemented by the U.S. Internal Revenue Service.

It is important to discuss your rollover accounts and options with your employer, IRA administrator prior to initiating the rollover to confirm eligibility for the rollover, obtain proper rollover forms and to carry out the rollover. The above steps are a general outline of what is required for a 401(k) rollover, however specific regulations, rules and policies may also apply.

Sources:

1. http://www.irs.gov

Estate Planning tips for Michigan Residents

Planning an estate in Michigan involves several of the key aspects of estate planning used in several other States. However, Michigan has its own estate relevant tax laws, probate procedures, and trust regulations that may affect the managing of, value and cost of the estate. Estate management can be divided into to categories 1) financial and 2) legal.

Since end of life constitutes legal settling of assets, identity, debts and taxes in addition to family related matters of end of life management, decision making etc. the estate management process has the potential to become complex, but doesn't always have to be.

This article will outline some of the basic aspects of estate management and planning in the State of Michigan, specifically probate, and taxes and then provide additional tips that may assist in the Michigan estate planning process.

Michigan estate probate law

Michigan's estate law can be read at the Michigan State Legislature website, the link for which is provided with this article and in this section. Some key points regarding probate outlined by the Michigan Estate Law are provided below. Please note, the probate process is not the only way to transfer an estate, as trusts may also be used and may limit public record of the deceased's Will and/or estate details.

• Probate proceedings must take place in county of next of kin's residence unless out of State, in which case County of estate holder's property subject to Court transfer. (Act 386, Section 700.3201)

• Informal application for probate can be filed with the probate court if no formal application has be filed within 28 days following death of estate holder (Act 386, Section 700.3301)

http://www.legislature.mi.gov/(S(i04vr0azntmhxaebq0y1in55))/mileg.aspx?page=getObject&objectName=mcl-Act-386-of-1998

Michigan estate and related taxes

In Michigan no inheritance tax currently exists and estate tax is variable along with the Federal Estate Tax that will be 0% for 2010 and $1 million thereafter excluding adjustments to the law. The maximum State income tax in Michigan is 4.35% and tangible personal property is taxed with real estate exemptions locally and not by the State. (retirementliving.com)

http://www.retirementliving.com/RLstate2.html#MICHIGAN

Holding assets in a Michigan estate may be worth taking a second look at due to the fact 1) tangible property is taxed heavily at the local level and 2) no Standard or Federal deduction exists for taxable income. Even though no inheritance tax is currently in place within Michigan, the potential tax levied on income and property can be quite high.

At the local level property tax can be as high as 50% with some exemptions regarding real estate according to retirementliving.com. Since the real estate exemption is quite high, it may be advantageous to transfer property to make use of this exemption and reduce property tax. A property tax calculator from the Michigan Department of the Treasury is provided below.

https://treas-secure.state.mi.us/ptestimator/ptestimator.asp

If Michigan estate property qualifies for the Michigan Principal Residence Exemption (PRE), total property tax of assets within the estate, be it inherited or otherwise, may be significantly reduced. Instructions on how to apply, qualify and obtain PRE are linked to below. This tax is quite relevant to the estate as property that does not become the principal residence of the estate beneficiaries may not qualify for the PRE exemption.

http://ww.michigan.gov/documents/2856_11014_7.pdf

Michigan estate tips

There are many aspects to estate planning in Michigan that should ideally be considered in the process. Since individual circumstances can differ considerably, no one estate planning method may be of best fit to the majority of Michigan estate planners. However, that said, several aspects of estate planning generally do stay the same in many cases including 1) estate tax strategy, 2) estate administration and 3) estate value and cost. The tips below are just a few of the actions, to be used with the reader's discretion and judgment, that may be helpful in estate planning in Michigan.

• File a principal residence affidavit to qualify for principal residence exemption
• Contemplate different asset ownership options ex: joint tenancy
• Read of the State probate laws and other relevant laws linked to in this article
• Keep track of changes to the Federal estate law as Michigan estate law is related to it
• Limit annual taxable estate derived income received after transfer
• If real estate does not qualify for exemption, consider non-taxable asset reallocation
• Contact and discuss estate planning with a local financial advisor or attorney
• Develop a short, medium and long-term estate plan, or whichever is appropriate
• Allow for estate flexibility in terms of asset transfer, ownership and management

How to rollover a 403(b) into an IRA

A 403(b) is an employer pension plan similar to an Individual retirement account. In some cases, cessation of employment or changes in retirement planning may require one to shift the funds and/or assets that have accumulated within a 403(b) into an IRA.

There are specific ways to rollover a 403(b) into an IRA without incurring tax penalties and that can therefore save a taxpayer from making unneeded expenditures as a result of the rollover. This article will discuss the methods by which a 403(b) can be rolled over into an IRA without incurring tax penalties in addition to discussing potential advantages, disadvantages and options surrounding the rollover decision/process.

 Assess qualifying distributions and retirement strategies

Not all funds within a 403(b) may qualify for rollover into an individual retirement account. Specifically, annuity distributions, minimum distributions and hardship distributions cannot be rolled over. (www.money-zine.com) Moreover, becoming familiar with what can and can't be rolled over is important.

It may also be worthwhile to considering the possibility of retaining a 403(b), rolling over a 403(b) into another 403(b) with different financial options, a 401(k) or Roth IRA. For example, a 403(b) may have a matching plan and maximum contribution limits that far outweigh the benefits of rolling over into an IRA. Moreover, it may be advantageous from a retirement planning perspective to utilize the best available option for rollover, which may not necessarily be an IRA.

That said, if one decides to go ahead with the rollover due to cessation of employment, or other factors weighing the different types of individual retirement accounts may be helpful. To be sure of which rollover best suits one's financial planning needs, carefully considering all the options available within each retirement investment vehicle can be beneficial and help inform one as to the financial possibilities. Also, becoming aware of the rules, contributions amounts, taxation of, and age limits on various retirement plan options may help one be better prepared for the future.

Methods and tools for Rolling over a 403(b)

The first step in proceeding with a 403(b) rollover is speaking with the appropriate financial institutions, trustees and account managers to inquire about the process. Depending on the institution, account, financial instruments within the retirement plan etc. different forms may be required. A few of the possible forms needed are provided below.

Forms needed for direct 403(b)-IRA rollover (investopedia.com):

• Direct rollover transfer application
• Contribution form signed and dated by IRA institutions
• Distribution request form
• Acceptance of transfer from IRA provider

Additionally, the rollover cannot take more than 60 days upon receipt of funds from the recipient if the 403(b) beneficiary is the recipient. In other words, if one's employer and IRA servicer are not facilitating the rollover from start to finish, the money could pass through the pension beneficiaries hands. In order to avoid incurring tax on these funds they must be re-deposited and traceable as such into the IRA within the 60 day time limit

Determine the type of Individual Retirement Account (IRA)

Once one has performed the direct rollover of the 403(b) into an individual retirement account, that individual may want to roll it over to another IRA such as a Roth IRA. 403(b)'s cannot be rolled directly into an Roth IRA but the IRA can be rolled over into a Roth. IRA's and Roth IRA's have different rules, salary requirements and contribution age limits that may make a second rollover worthwhile. There are several benefits associated with Roth IRA's that could outperform the advantages of retaining a 403(b) or only rolling over into an IRA. Those benefits associated with Roth IRA's are listed below:

Advantages of a Roth IRA:

• Higher maximum contribution amounts
• More investment choices
• A Roth IRA can be held simultaneously alongside a 403(b)
• No age contribution limit
• Earnings may not be subject to taxation upon withdrawal
• No required withdrawal/distribution age
• Contributions are made with after tax income therefore is non-taxable after withdrawal
• Only earnings on maximum contributions are taxable
• Has exemptions for early withdrawal ex-education expenses

Summary

Rolling over a 403(b) into an IRA is a process within retirement planning and personal financial management that may come about due to changes in employment, available financial options, physical relocation etc.

After one has weighed the best financial options available and chooses to go ahead with a 403(b) rollover, the steps to rolling over funds without taxation should not be too complicated or take more than 60 days if one is adequately prepared and informed.

Once the rollover is complete, the beneficiary may also want to consider a second rollover into a Roth IRA if one qualifies for such. These decisions are the responsibility of the individual however and may be made with the assistance of a financial consultant.

Sources:

1. http://www.investopedia.com/ask/answers/142.asp
2. http://www.403bwise.com/wisemoves/irarollover_vt.html
3. http://www.fairmark.com/rothira/roth401k/compare-ira.htm
4. http://www.fairmark.com/rothira/taxable.htm
5. http://beginnersinvest.about.com/cs/iras/f/tradvsrothira.htm

How to Create a Living Trust

A living trust is a legal document that serves several purposes in the event of death of the primary trustee and concerns the assets of that person. Living trusts may be revocable or irrevocable, and each type has different legal protections, and functions. Depending on where the living trust is created, the effectiveness and creation of the document may have different requirements. This article will discuss the creation of living trusts in terms of its purpose, process and type. 

How to create a living trust

A living trust must be created in accordance with State law and therefore is ideally created by a lawyer licensed to practice law in that State. There are online legal services that allow state trusts to be customized online, one such example being lawyers.com. that offer 1 free legal document to first time users and/or within the free trial period of 30 days. There are several considerations and elements within a living trust that should be included in the document and defined before its creation. 

1. Define the purpose of a living trust 

There are many purposes for living trusts, therefore defining the purpose will aid in choosing the correct type of trust for that purpose. For example, in a generational skipping trust, assets are passed onto grandchildren rather than children in the event of death of the grantor or primary trustee. A more complete list if trusts can be found at livingtrustnetwork.com. 

2. Locate a reliable living trust creator 

Since living trusts can be complex especially in the case of large estates that will be divided in several ways, consulting a licensed trust attorney in one's state of permanent residence can be helpful. When choosing a source for the living trust be sure to ascertain the validity of the living trust by confirming the following details:

• State(s) of effectiveness

• Compliance with State laws and/or regulation
• Appropriateness of trust to individual and/or family goals
• Proper terminology and listing of beneficiary, trustees and assets 

3. Write the trust 

When the living trust is written it will include several items and will likely need to be notarized to become effective. Notarization may be performed by a licensed notary within an attorney's office or independently at an external licensed notary such as a bank notary. Some typical elements included in a trust are listed below.

• Type of trust i.e. revocable or irrevocable

• Sub-type of trust i.e. A/B trust
• Primary trustee/Grantor's name
• Secondary trustee(s) name(s)
• Asset list
• Distribution terms and allocation amounts 

4. Transfer chosen assets into the living trust 

After the living trust is completed, an additional step of signing over assets to the trust is necessary to avoid legal complication. This means ownership of all assets within the trust must become part of the trust. For example, a home's title deed can be signed over to the trust, bank accounts can be changed to list the trust as the owner etc. There may or may not be filing fees for some of the reclassification of assets. 

The purpose of living trusts 

Living trusts serve several purposes as made evident by the many types of living trusts available. Essentially, living trusts are created by living persons to pre-determine who will distribute assets after the death of the primary trustee and how it will be done. Living trusts provide legal protection to the passage of ownership after death of the grantor.

• Allows beneficiaries and/or trustees to avoid probate court

• Makes possible non-taxation of transferred funds if a trust company is owned by the trust
• Assigns a fund executor to carry out the provisions set forth in the living trust
• Defines how assets are distributed, to who they will be distributed and by whom
• Creates a legal entitlement to assets 

Types of living trusts 

There are two primary types of living trusts, revocable and irrevocable. These types of trusts are distinguished by their ability to reverse decisions set forth by the initial trust. For example, in a revocable living trust, trustees can be removed or added whereas in an irrevocable living trust, this is not the case.

In addition to these two primary trusts are several sub-types of living trusts that include the following according to livingtrustnetwork.com of the following trust sub-types determine how assets are used, allocated and treated when the terms and instructions of the living trust are implemented.

• A/B Trusts

• Asset protection trusts
• By-pass trusts
• Charitable trusts
• Generation skipping trusts
• Grantor trusts
• Life insurance trusts

Summary

Creating a living trust can be done relatively easily but takes a few important considerations regarding the distribution of one's assets after death. These types of trusts come in several types as outlined above and are ideally prepared by an attorney familiar with and skilled in the creation of such documents.

To create less expensive living trusts, online legal trusts may be obtained through state specific documents available through websites such as lawyers.com. When the purpose and use of the trust is defined, the document is then customized, signed by the relevant parties such as the grantor and trustees and then assets are legally reassigned to the trusts ownership.

Sources:
1. http://trusts-estates.lawyers.com/State-Living-Trust-Forms.html
2.http://livingtrustnetwork.com/revocable-living-trusts/types-of-trusts.html

Estate Planning Tips for Illinois Residents

Estate planning in the State of Illinois can be simple or complex depending on the steps taken by the estate owner prior to transfer of that estate. The estate can become difficult to manage if there are a lot of assets, beneficiaries, heirs, creditor claims, Will specifications, family disputes, ambiguous or conflicting circumstances etc. To lessen the complications associated with the management of the estate several considerations and familiarity with the Illinois estate management process may be worth while.

This article will discuss Illinois estate planning in terms of 1) Illinois estate law, 2) Illinois estate transfer options, and 3) Illinois estate planning and management methodology. To begin, before planning an estate, it can be helpful to gain an understanding of what is generally involved and required. These things are affected by the State(s) in which the estate and/or its assets are held and the laws governing the distribution of assets in the event of death.

Illinois estate law

Being aware of Illinois Estate Law or planning an estate with someone who is, can be quite important. The following link provides access to Illinois State laws pertaining to State estate taxes, probate, and legal Wills and powers.

These laws can serve as a reference to the estate planner when confirming a specific course of action such as how one's medical treatment will be managed in the case of incapacitation. For example, in Illinois, and according to the Illinois Living Will Act, an individual may create advanced directive limiting the application of medical treatment in the event of non-functional decision making capacity.

http://law.findlaw.com/state-laws/estate-planning-law/illinois/

A few aspects of Illinois State law that may be useful to the estate planner are those laws pertaining to 1) the probate or trust administering process, 2) the creation of legal estate management documents, 3) the management of the estate prior to transfer and 4) the taxation of an estate within Illinois. The following website provides information on Illinois taxes including estate, inheritance, property, and income tax. These taxes are relevant to the value and cost of an estate.

http://www.bankrate.com/brm/itax/edit/state/profiles/state_tax_Ill.asp

Illinois estate transfer options

When the time comes for the distribution of an estate in Illinois, the County and/or City Circuit Court may need to be contacted for registration of documents and determination of transfer options as there are several. The following website provides information on many county estate requirements within the State of Illinois and serves as a useful reference as to 1) what estate proceedings may be necessary, 2) what estate management options are available and 3) which Circuit Court and/or persons to contact for information.

http://www.probateillinois.com/index.html

1. Through probate

• File Will with county government as required by Illinois law
• Locate a flat rate probate attorney rather than percentage based if estate is of high value
• Obtain necessary documents of death, residency, creditors etc. of the estate owner

http://www.familyestate.com/main/probate.htm

http://www.illinoislawyerfinder.com/publicinfo/estate.html

2. Through Trust

Estate distributions via a trust are regulated by the Illinois Trust and Trustees Act. This act describes in detail the role of trustees, the extent of a trust's capacity, and the means by which a trust is implemented among other things.

For additional questions pertaining to trusts, registration requirements, and any State mandated documentation related to the death of the primary trustee and/or estate owner, and the execution of the trust the following resources may be consulted:

• Trust documentation itself
• Applicable Circuit Court
• Illinois Trust and Trustees Act
• Attorney's specialized in estate management and certified in Illinois

3. Other estate distribution options

In addition to probate and trust administration of an estate, other means may be available dependant on the size of the estate in terms of dollar value, and the provisions allowed by the Court in which documentation and process may be required. Some of these documents and/or methods include the following, and may assist the Illinois estate recipient(s) in saving time and money.

• Illinois Small estate affidavit: May help bypass probate court. (familyestate.com)

• Illinois Summary administration: Terminates probate proceedings, and allocates real property to be retained by heirs. (chicagoprobate.com)

Illinois estate planning methodology

To get a better grip on the estate planning process in Illinois it can be helpful to use a variety of tools such as a concept map, checklist, estate planning software, or independently derived estate planning method. The reason why these tools can be helpful are the many potential elements of the estate including asset allocation, estate management, creditor and family claims, and incomplete estate planning.

The following list includes the resources available that can help with the estate planning process in Illinois. If part of an estate is granted to a charity, the legal services of that department may be able to assist with the remainder of the estate planning as part of the agreement. Additional estate planning services include the following:

• Illinois Department on Aging legal assistance

• State specific estate planning documents (uslegalforms.com)

• Trust and Estate planning questionnaire (files.ali-aba.org)

• Illinois estate lawyers (lawyers.com)

• Additional estate planning resources I (legaline.com)

• Additional estate planning resources II (giftestate.com)

Disclaimer: The information contained in this article does not replace the advice of an attorney or certified estate financial planner. The author of this article does not claim liability for any consequences regarding the reader's use of such data. The information in this article is to be used at the sole discretion of its recipient.

Estate Planning Tips for Hawaii

If moving to a continental United States estate friendly State isn't for you, Hawaii might be. With no inheritance tax or tax on personal property, descendents can own the priciest of vehicles without property tax provided they aren't classified as 'real property'. Keep in mind Hawaii does have state income tax up to 8.5% (1) meaning inherited annuities that aren't tax protected may be subject to income tax.

Hawaii does have an estate tax aka. Death tax that is linked to the federal estate tax which will be non existent in 2010 (7). That said, if the estate tax law is not re-legislated by 2011, an estate tax may once again exist for estates valued over $1 million or higher. The remainder of this article will discuss estate planning in Hawaii in terms of 1) ease of estate distribution, 2) pros and cons of estate planning in Hawaii and 3) useful procedure(s) in estate planning.

Ease of estate distribution

Estate distribution takes place following the death of the Estate's original owner. How this takes place can be affected considerably by 1) how assets are owned within Hawaii, and 2) what financial instruments and/or assets the estate is comprised of.

Moreover, assets that are already owned by the beneficiary prior to probate or action by a trustee executor don't need to be distributed as an estate in Hawaii. The following techniques may prove helpful in bypassing some of the more lengthy procedures of an estate's administration such as estate tax filing, probate, private management etc.

• Joint ownership of real property and personal property (4)
• Gifts from the estate less than $1 million in taxable gifts (10)
• Property location in Hawaii instead of many States (5)
• Spouse beneficiaries receive estates tax-free (6)
• Use of asset protecting trust (APT trust) or other beneficial trusts (11)

The following legal website suggests several options for estate planning in Hawaii that bypass the need for a Will in addition to additional estate planning tips.

http://research.lawyers.com/Hawaii/Estate-Planning-in-Hawaii.html

With joint ownership with rights of survivorship, property passes directly to the survivor even if that person is not related. This avoids transfer of assets and the death tax. Additionally, if property is owned and/or registered in Hawaii instead of multiple States, the possibility of out of State estate axes being imposed on that property are reduced and legal complications bypassed.

Pros and cons of estate planning in Hawaii

The advantages of planning an estate in Hawaii are perhaps less tangible than in some other estates. If scenery, climate and a relatively stable housing market count as benefits along with some tax free property ownership and no tax on inherited money, then there are some.

However, cost of living and income tax in Hawaii is high making owning the proceeds of an estate or an estate that hasn't been passed on potentially high maintenance in terms of costs.

Furthermore, having an estate in excess of the Federal and/or State Minimum value requires the filing of Estate tax returns that involve additional bureaucracy. For Federal returns an IRS form 706 (8) is required and for Hawaii Department of Taxation estate returnsM6 and/or M6 GS are required. (9)

Estate planning procedures

To plan an estate in Hawaii starting from the beginning of the process helps. For example, the following process illustrates how one might go about thinking about an estate plan.

• List assets by type, value, account etc. then total estate worth

• Identify estate value lowering techniques as well as estate cost saving measures

• Verify asset distribution prior to creating legal documents

• Consult with an estate attorney, accountant, or financial planner if necessary

• Create Hawaii specific living Will (3), Trust(s), Power of Attorney if applicable

• Place assets in appropriate trust(s), increase insurance death benefit

• Convert assets to tax free financial instruments/assets

• Monitor estate, market developments and State laws for changes

In Hawaii, specific estate planning methods may prove cost effective when implemented in conjunction with Hawaii's and Federal estate law. For example, real property may be transferred to personal property and then that personal property may be registered as being jointly held with rights of survivorship in which case the property is not part of the estate's total value.

Since Hawaii has a high income tax, estate assets that could yield a high income such as non-insurance death benefit annuities, dividend income, estate property rental income may be reallocated into non-income bearing assets that can be sold or converted as needed.

Additional Hawaii estate planning resources

The following resources were used in compiling the above article and may be of additional assistance to estate planners, readers or others interested in learning about estate planning in Hawaii.

The content of this article does not replace nor does it intend to replace the advice of an attorney, accountant or any other professional involved with estate planning and is to be used at the readers own discretion. The author of this article assumes no responsibility or liability for the use of content within this article or the estates of said parties.

Sources:

1. http://www.bankrate.com/brm/itax/edit/state/profiles/state_tax_Haw.asp
2. https://www.fhb.com/ins-estate.htm
3. http://www.legalzoom.com/wills-state-requirements/hawaii-will.html

4. http://research.lawyers.com/Hawaii/Estate-Planning-in-Hawaii.html
5. http://library.findlaw.com/2001/Feb/1/127804.html
6. http://tinyurl.com/4fwp7cp

7. http://www.hawaiireporter.com
8. http://www.irs.gov/pub/irs-pdf/f706.pdf
9. http://www.state.hi.us/tax/a1_b3_4estate.htm

10.www.irs.gov/pub/irs-pdf/p950.pdf
11.http://www.rjmintz.com/appch9.html

Estate Planning Tips for New Jersey Residents

New Jersey is a heavily taxed State and its estate tax is not directly linked to the Federal estate tax as of July 1, 2002. (10) This and other State tax regulations can affect estate values and estate derived income considerably. These regulations are contained with New Jersey Statute, Chapter and Case law, notably Title's 3A, 3B and 54 of New Jersey Statute law and Chapter 31 of New Jersey Chapter Law. These laws can be found and read at the New Jersey State Legislature website.

Since there are many estate regulations in New Jersey that can impact the management and value of an estate, a carefully planned estate may be necessary to optimize the estate's value and cost. This article will discuss key aspects of New Jersey estate planning, taxation and regulation. It will also provide tips to consider when planning around New Jersey estate regulations, as there are ways to plan an estate to minimize estate taxes and maximize estate objectives.

New Jersey estate planning considerations

The following section illustrates the potential taxes and noteworthy items that may affect an estate, in addition to estate or estate related requirements that can prolong or limit the receipt of an estate by beneficiaries of that estate. More regulations than can be covered in this article exist pertaining to New Jersey estate planning, however some notable aspects of such regulations are the following.

• $675,000 of a New Jersey estate's value is estate tax free (11)
• New Jersey compliant out of State wills filed in State are accepted (8)
• New Jersey inheritance tax returns are often required (3)
• Estate assets may require property release waivers (3)
• Safety deposit boxes and contents, are not "inventoried" by the State (3)
• Transferred retirement instruments can reduce immediate estate tax
• "Entity structuring" may afford liability protection from creditors (13)

• Inheritance tax 0%-16% (3)
• Estate tax: Determined from information on Federal Estate tax return (4)
• Property tax: Locally determined and based on market asset value (4)
• Income tax 1.4-8.97% (1)
• Gift tax 0% (15)

In light of the above factors, the following techniques may be helpful when planning an estate in New Jersey as clearly an estate tax strategy may be in order when planning a New Jersey estate. As with all estate planning, it can be a good idea to first determine the estate's goals and objectives prior to devising a strategy and putting together estate planning technique to accomplish such.

• To avoid default intestate estate transfer, complete a valid New Jersey will (2)
• A bypass trust may be useful if the estate's value is higher than State estate tax exemption, and will be transferred into two generations. (10)
• Make use of New Jersey's lack of gift tax to pass estate value prior to death
• Receive estate income distributions via annuity rather than lump sum
• Relocate and register real and tangible property to another State if possible
• Transfer non-necessary assets into tax protected financial instruments
• Maximize life insurance death benefits as they are tax-free (3)

Estate planning financial instruments

Several financial instruments and allowances may be beneficial when planning an estate. These instruments or allowances within the law can assist in maximizing exempt estate value, reducing tax, and increasing estate value either through higher retained value from lower management cost or improved estate management techniques. The following is a list of financial instruments and possibilities that may assist in the estate planning process. Since New Jersey is quite particular about estate values and inheritance, the use of specialized estate management tools may be wise.

• Retirement plans such as IRA's can be effective asset protection vehicles (14)
• A/B Trusts: Make use of estate holder and spouse's estate tax exemption (11)
• Life insurance: Cash value may be taxable whereas death benefit is not. (3)
• Asset protection trusts, and/or companies i.e. trust companies (14)
• Marital joint property (14)

Also included in estate planning are the records, especially State specific estate documents. These records or documents may include those listed below, some of which are available and/or viewable at the New Jersey Department of the Treasury, Division of Taxation website. Determining which documents are needed should ideally become apparent during the estate planning process.

The legality and effectiveness of these records can be validated by an attorney, notary, state official etc. Invalid documents and assets that aren't registered in a trusts name may cause an estate to go through probate or similar process, hence the importance of creating valid documents. Listed below are some documents that may be needed in New Jersey.

• Form L-8 and L-9 Real Property tax waiver
• IRS Form 706 required for New Jersey estates over $675,000
• New Jersey estate tax return, form IT-State
• Insurance proceeds, form O-71
• Estate corporation formation certificates and registration documentation

New Jersey estate planning preferences

Listed below are sources that may assist the reader in the New Jersey estate planning process. The information in these sources are referenced in this article. Since the estate planning process is diverse, and potentially complex, many considerations can come into play when planning an estate. For this reason consulting local estate planners trained and familiar with New Jersey estate regulations may be worth the cost and potential headache of not having planned correctly or overseeing certain aspects of the estate planning process.

Sources:

New Jersey estate planning:
(1) http://www.jerseyestateplanning.com
(2) http://research.lawyers.com/New-Jersey/Estate-Planning-in-New-Jersey.html

New Jersey tax information:
(3) O-10-C - General Information - Inheritance and Estate Tax (paste in internet browser)
(4) http://www.state.nj.us/treasury/taxation/index.shtml
(5) http://www.bankrate.com/brm/itax/edit/state/profiles/state_tax_NJ.asp

New Jersey estate laws:
(6) http://law.findlaw.com/state-laws/estate-planning-law/new-jersey/
(7) http://www.megalaw.com/nj/top/njprobate.php
(8) New Jersey State Statute(s)

New Jersey tax forms:
(9) http://www.state.nj.us/treasury/taxation/taxprnt.shtml

Additional New Jersey estate information:
(10) http://www.demaio.com/fs/articles/decouple.htm
(11) http://www.allbusiness.com/government/government-bodies-offices-regional-local/12362447-1.html
(12) http://www.oceancountygov.com/surrogat/guide.htm#a2

New Jersey Estate Law: Chapter 31 of New Jersey Public Laws of 2001, estate tax
(13) http://www.njleg.state.nj.us/2002/Bills/A2500/2302_I1.HTM

New Jersey asset protection:

(14) www.marksklein.com/articles/NJLawyerArticleupdated4-24-07.pdf
(15) www.abanet.org/rpte/publications/ereport/.../TE_Bruce-Steiner.pdf