TAX NOTIFICATION: Retirement Planning Revamped Under The SECURE Act

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By Sasha A. Klein

Happy New Year!!  In the tax world, it wouldn’t be a New Year without tax legislation impacting your planning. Welcome to 2020 and with it, new significant tax legislation that may have a meaningful impact on your retirement planning.

What’s important to know? 

NAME: The Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE” Act) was signed into law on December 20, 2019.

EFFECTIVE: The SECURE Act is effective January 1, 2020.

CHANGES: The Most Notable Changes to Retirement Planning under The SECURE Act:

• Elimination of the “Stretch” IRA. Elimination of the ability to “stretch” certain inherited retirement accounts over a designated beneficiary’s life expectancy.
• Raises RMD Age. Raises the age at which required minimum distributions (RMDs) must begin from the year the taxpayer attains age 70 ½ to 72.

Reverse Mortgages: Helping or Hurting Seniors?

By Michael J Posner

Recently an editorial published in USA Today on June 13, 2019 (read here: tinyurl.com/y36lvwjp) basically viewed reverse mortgages as simply predatory lending designed to steal seniors’ and the heirs’ homes without any benefit or knowledge.  As a board-certified real estate attorney and Florida HUD Commissioner who has seen and dealt with many reverse mortgage foreclosures, I do not agree with this perspective for a number of reasons explained below.

First, the editorial fails to clearly discuss several important facts:

1. Without the loans, many seniors would have been forced to sell the homes anyway, due to the inability to pay maintenance costs (such as major structural repairs, and roofs), existing loans (which may be burdensome), or taxes and insurance;
2. No one forced these seniors to take the loans and spend the money they received, even if spent frivolously;
3. A majority of foreclosures occur not due to defaults relating to non-payment of taxes or insurance, but due to either abandonment of the home (residing in the home is a condition of getting and keeping the loan) or death;
4. Claiming that the heirs lost out on getting the home due to the reverse mortgage is a false premise, because it presupposes that the heirs deserve the home even though their parents needed and got to enjoy the benefits of the reverse mortgage money; and
5. Many foreclosures occur simply because reverse mortgages were granted before the crash, and the monies given were based on a higher pre-crash value. Combined with the accrued interest over 10 to 15 years (a key to how these work, seniors pay nothing during the term of the loan), and all the costs of sale (as high as 8% for real estate commissions, taxes, transfer taxes and title insurance), there is little to no equity left to interest the heirs or the estate to consider selling the properties.

Closing Costs Confusion: Who Pays for What?

By Adam R. Seligman

Every buyer and seller understands what a purchase price and closing date are, but oftentimes, they are not sure which party pays the closing costs associated with the closing.

Who Pays for What?

In the most recent iteration of the commonly used residential form contract in Florida, also known as the “FR/Bar,” paragraph 9 lists out which default costs are the responsibility of the parties (unless negotiated otherwise).

For example, the party who pays for title insurance is often negotiable, and custom is often what dictates who pays for what. In Broward and Miami-Dade counties, the custom is that the buyer pays for the title insurance, while in most other counties throughout Florida, the seller does.

Tax Reform Highlights

By Sasha A. Klein

The most significant change to the U.S. tax code in 30 years was approved by Congress and signed by the President just in time for Christmas 2017.  Many of the provisions became effective January 1, 2018, only a few days after being enacted.

SO, WHAT DOES IT CHANGE?

Corporate and Pass Through Entity Income Tax: Permanent

Corporate Tax Rates are reduced from 35% to 21%.

Business Income from Pass Through Entities: provides for a 20% deduction for individuals and trust and estates on domestic qualified business income from pass-through entities.

• Effectively reduces the top tax rate for those eligible to 29.6% (from 37%)
• Wages paid to owners and certain income from specified services business (i.e. attorney and accounting firms) are excluded from the deduction.

Digital Asset Law Breaking News: Personal Representative May Be Given Access to Decedent’s Email

By Sasha A. Klein

On October 16, 2017, the Supreme Judicial Court of Massachusetts ruled favorably on a Personal Representative’s access to a deceased user’s online accounts and digital property (Ajeman v. Yahoo). This is the first reported case with respect to access to digital assets by a fiduciary.

The conundrum: Email are part of a deceased user’s estate.  But a personal representative (aka executor) can’t read them without violating Federal privacy or anti-hacking law.  The Ajeman case is the first to permit access and will empower fiduciaries throughout the U.S.

10 Things You Need to Know