Individuals often have to pay excise taxes in addition to income taxes because they make two major mistakes: they take money from their IRA too early or take it too late.
San Diego, CA (PRWEB) September 07, 2016
Attorney Antoinette Middleton, the founder of the Law Offices of Antoinette Middleton, has met a number of workshop participants who were confused and frustrated when trying to understand all the rules regarding their IRAs. “One of the primary reasons for this confusion is they get information from so many different sources, and each source focuses on a different issue,” said Middleton, co-author of “Protect Your IRA: Avoid the 5 Common Mistakes.”
To help people protect their IRAs, Middleton lists the following five common mistakes to avoid:
No. 1: Trying to avoid income taxes now. “The Internal Revenue Code, commonly referred to as the ‘tax code,’ created special rules to allow for IRAs because the government was trying to institute a significant public policy to ensure people became less dependent on Social Security,” said Middleton. “To do this, the government incentivized us to save additional money for our retirement by creating tax benefits to us now to save for retirement later.”
No. 2: Incurring unexpected excise taxes. “Everybody’s trying to save income taxes, and they don’t even know to avoid excise taxes,” added Middleton. “Individuals often have to pay excise taxes in addition to income taxes because they make two major mistakes: they take money from their IRA too early or take it too late.”
No. 3: Losing your IRA to long-term care costs. As people age, there’s always the possibility they will not be able to care for themselves, which can come at a cost and one’s IRA can be a great way to be able to afford the care they need to be able to stay in their home. “The question becomes, ‘How much is it going to cost and are you going to be able to afford it?” asked Middleton.
No. 4: Paying income and estate tax. “Another common mistake many people make is having to pay income and estate taxes on their IRA,” said Middleton. “Most people still do not use all their IRA before their death and can pass it on to their beneficiaries, but before their beneficiaries can receive the IRA, there may be estate taxes due. The horror of this is you will have to pay the income tax on any money taken from the IRA to pay the estate tax, which leads to your IRA being subject to two taxes after your death.”
No. 5: Naming your beneficiaries as beneficiary. “In 2014, the U.S. Supreme Court, in Clark v. Rameker, ruled while your IRA is protected from your bankruptcy and all other creditors, it is not protected from the bankruptcy of those who inherit your IRA,” concluded Middleton.
In their book, attorney Middleton and attorney and CPA Dave Zumpano, co-author, discuss each mistake in more detail and provide various scenarios so that people have a better understanding of why so many make these mistakes. To request a free copy of “Protect Your IRA: Avoid the 5 Common Mistakes,” or to email the firm to register for a free estate planning workshop, visit http://www.lawofficesofam.com/contact.html.
About The Law Offices of Antoinette Middleton
The Law Offices of Antoinette Middleton focuses on estate planning, to include wills, revocable living trust, advance health care directive, power of attorney, special needs trust, trust administration and long-term care; and asset protection, including irrevocable trusts, business planning and succession, Medi-Cal and veteran’s benefits. The firm also handled Probate cases, and guardianships and conservatorship petitions. For a free copy of the book or more information, please call (619) 235-9501, or visit http://www.lawofficesofam.com. The law office is in Mission Valley, at 1761 Hotel Circle, Suite 115, San Diego, CA 92108.
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