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Archives for December 2022

ABCs of 2022 RMDs

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Perplexed? Need to take an RMD in 2022?

Over age 72? – The age for withdrawing from retirement accounts was increased in 2020 from 70.5 to 72. Your first RMD (required minimum distribution) must be taken by April 1 of the year following the year in which you turn 72. After that, your RMDs must be taken by Dec. 31 of each year. However, if you became 72 in 2022, you may want to withdraw the first RMD in 2022. This will avoid having two RMDs in 2023 and bunching income into higher tax brackets.

Beneficiary of an IRA account?– An individual non-spouse beneficiary must begin taking RMDs on the basis of his or her own life expectancy by December 31 of the year after the owner’s death. If the original retirement account owner passed away in 2022 prior to taking this year’s RMD, it still must be withdrawn. The responsibility for taking the year-of -death RMD falls to the beneficiary.

Although the RMDs are calculated based on the beneficiary’s life expectancy, if the original account owner passed away after Jan. 1, 2020, you will need to fully distribute the account within ten years from the owner’s date of death. In the tenth year, the balance of the account will need to be distributed.

If an estate is the beneficiary of an IRA, and the account owner reached age 72, the distributions would be based on the remaining single life expectancy of the IRA owner. If the original account owner passed away in 2022 prior to taking this year’s RMD, the estate must withdraw it by the end of the year. If the owner was younger than 72, the assets must be completely distributed within five years of the owner’s passing, but no annual RMD is required.

Want to save income taxes on the RMD? – Use a Qualified Charitable Distribution (QCD) in 2022 For IRA owners with charitable intentions, there is a substantial tax benefit using a QCD. The owner contributes all or part of his RMD to charity. The portion contributed to charity will not be taxed. QCDs can be made as early as age 70.5, even though minimum distributions are not required until age 72. A QCD may only be made by an original account owner, not by a beneficiary.

What happens if I don’t take the RMD in 2022? If an account owner fails to withdraw a RMD, the amount not withdrawn is taxed at 50%.

Still perplexed? Everyone’s situation is different. Please consult with a tax advisor at Urbach & Avraham, CPAs, to analyze the impact on your personal situation.

Avoiding Pitfalls of Guardians

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A Guardian may bear personal liability for his actions or inactions. There are many pitfalls to avoid while managing the ward’s assets.

Insurance–  Guardian must keep insurance on the ward’s home , even if the ward no longer lives there. The homeowner’s insurance company must be informed that the home is vacant. Guardian should inventory all valuables in the home such as jewelry, musical instruments, paintings, etc. and ascertain that these are all properly insured.

Winterize the house, even if the heat is supposedly being kept on. Turn off the master water valve and open the faucets to let the water drain.

Guardian must keep insurance on any automobiles, even if the vehicle is not being driven.

Health Aides -If the ward is still at home and cared for by health aides, the insurance policy must have coverage for domestic servants. If the aides are not covered for workers’ compensation, the Guardian may be liable for the aide’s medical expenses if injured on the job.

If the ward moves to a facility, the private health aide isn’t covered by the homeowner’s insurance policy. Therefore, in this scenario, a private aide must be engaged by a health care agency to be properly insured.

Income Taxes– In addition to handling the preparation of all current tax returns, the Guardian must ascertain if the ward has any unfiled tax returns for prior years or any outstanding tax obligations. The IRS and the state tax authorities should be contacted to verify and resolve these issues.

Mortgages– Review the terms of all mortgages. Determine if mortgage should be refinanced. If the ward moves to a facility, a reverse mortgage may have to be paid-off within a few months.

Real Estate– If the ward moves to a facility or to a family member’s home, his prior residence should be sold or rented. Guardian should evaluate the options given many factors: the ward’s cash flow needs, expenses to maintain, potential appreciation and the real estate market.

Investing Liquid Assets– Guardian should review all bank and brokerage accounts and make sure that all assets are invested properly.  A qualified investment advisor should be engaged to invest according to the ward’s needs and according to the Prudent Investment Act.

Accounting- Guardian must file an annual accounting with the Court. Good records and a journal of all cash receipts and disbursements must be maintained in order to prepare an accounting.

A Power of Attorney has the right to handle many of these functions, however, the Guardian is court-appointed and has the obligation to perform all these jobs.

Navigating through the guardianship maze is overwhelming. We can assist you with this difficult process. Working with Urbach & Avraham, CPAs is unique because we know what you’re going through. Several of our firm members have taken care of their elderly parents or special needs relatives. Please contact us to see how our CPA firm can assist you.