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The Better Business Bureau is again warning individuals, particularly senior citizens, to watch out for investment scams and schemes that seem too good to be true.

A common technique to lure people in, according to a report by the Better Business Bureau of Southeast Texas, is the offer of a free financial seminar over lunch.  In an article written by Jennifer Johnson and published in the Examiner, The Independent Voice of Southeast Texas, it was reported that the Securities and Exchange Commission had shut down a Ponzi scheme that stole $20 million from retirees in California and Illinois. The article stated that, "The scammers invited senior citizens to estate planning seminars and later coaxed their victims into buying promissory notes for purported Turkish investments."

You can read the entire article here.  But, be careful and pay attention to that old adage that goes something like - "If it sounds too good to be true, it probably is." 

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In a private letter ruling, the IRS has ruled that income earned by California registered domestic partners will be treated as community property for federal income tax purposes.  Apparently, this is the first time that the IRS has acknowledged same-sex couples as a single tax unit.

Although we have just received a copy of the private letter ruling and have not had an opportunity to study it in detail, the Wall Street Journal has published an article on it by Laura Meekler.  Attorney Joseph Hahn also wrote about it in "Hahn's Estate Planning Blog."

For a fairly good explanation of the practical implications of the IRS' new position on the application of the tax laws to same-sex couples, take a look at Attorney Hahn's article cited above.

The IRS ' Private Letter Ruling (Number: 201021048) was released on May 28, 2010.  To read the IRS' Private Letter Ruling in its entirety, please click here. 

If anyone has any further insight into this new development, we'd certainly appreciate a comment below.

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I previously wrote about the so-called "stretch" IRAs or, as some like to call them, "stretch and protection" IRAs.  Whatever the name, the importance of this type of IRA is that, upon your death, your children and/or other beneficiaries can take the money in your IRA over their lifetime rather than in a lump-sum.  This has the potential of greatly increasing the benefits to the beneficiaries because the tax deferral of investment earnings can continue during the lifetime of the beneficiaries and the overall income taxes can be substantially lowered.

Radon Stancil, CFP®, and Rick Parkes, LUTC® of Diversified Estate Services have written an article entitled, "Maximizing your money through stretched IRAs," which explains the benefits of a stretch IRA.  Because the article isn't too long, I'm reproducing it in its entirely right here:

"Since their introduction in 1974, Individual Retirement Accounts, or IRAs, have become a cornerstone of many investment portfolios, providing a road to financial security for millions of Americans. In setting up a will or trust, however, many people unknowingly miss the opportunity to maximize the value of their IRA or 401(k), which is often times the biggest asset left to heirs. As a result of this missed opportunity, most beneficiaries who inherit IRAs end up paying more taxes than what’s necessary.

The best way to maximize an IRA intended for an inheritance is to set up a 'stretch' by taking advantage of an important IRS tax code provision.

Before 2002, beneficiaries of an IRA, 401(k) or other type of retirement plan, had no other option than to receive their inheritance in a lump sum. This led to huge tax liabilities, especially in cases where these inherited IRAs were large.

For example, at that time if you had a household income of $100,000 per year and suddenly inherited an IRA of $200,000, your income tax rate would shoot up to the top tax bracket, and you would end up owing 40 percent of your annual income and inheritance to the government. The worst part was that there were very few options for getting out of this situation.

Fortunately, in 2002, a tax code provision came into effect allowing beneficiaries to defer taxes on the majority of inherited IRAs, making a huge difference in both immediate tax liabilities, as well as the lifetime value of the inherited account. In order to take advantage of this provision, investors in IRAs and their beneficiaries must correctly set up everything in a will or trust.

To effectively stretch an inherited IRA, you need to know a few things. Stretching IRAs can get complicated, and you’ll probably want to consult with a qualified estate planner or financial professional for more details, but here are the important points to keep in mind:

• The custodial document and beneficiary form must permit the IRA stretch    provision. • A non-spouse beneficiary cannot roll the account assets into his or her own account. • A living person must be named as the beneficiary of the IRA. • If multiple beneficiaries inherit the IRA and each wants to use their own life expectancy in setting up a stretch, the account must be split by December 31 of the year after the account owner’s death.

Unfortunately, many don’t know about the stretch provision and fail to use it. It doesn’t cost anything to set up a stretch, but, in order for it to work, not only must the account holder set up the stretch, but the beneficiary must also know how to implement it.

To make sure you don’t miss anything when setting up a stretch IRA or implementing a stretch, your best bet is to consult a professional, such as an estate planner or financial advisor who is experienced with IRAs and knowledgeable about the details regarding stretching the account."

Radon Stancil, CFP®, and Rick Parkes, LUTC® have 45 years of combined experience in the financial services industry and assist North Carolina residents with their comprehensive financial needs including IRA management, retirement income planning, investing, tax planning, risk reduction and estate planning. For more information please give them a call at (919) 787-8866 or visit their website at www.desllc.org. 

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In an article published by Lifestyle, Elderlawanswers.com explains that the House and Senate conferees will soon sit down to reconcile two very different budget bills that cut billions from the Medicaid program. The House bill, H.R. 4241, apparently contains provisions that will punish unwitting elders who have given their families modest gifts, and will force some middle-income elderly to sell their homes and spend down the proceeds.

For those who are concerned about needing skilled nursing care now or in the future, either for yourself, your spouse, or a parent, you can read the entire article at the Lifestyle website.

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Today, I ran across an article entitled, "The GRAT Rush of 2010." The article was written by Deborah L. Jacobs, an attorney and journalist, and published in FA (Financial Advisor) on March 29, 2010.

I'm pointing out this article because it relates to the trend in Congress to eliminate some popular estate planning tools that have been used successfully by wealthy individuals in the past.

This particular article focuses on one of these popular estate planning tools - the Grantor Retained Annuity Trust or GRAT for short.  If you're already participating in one of these GRATs, then this article should be particularly interesting because it addresses the fact that Congress is about to abolish it.

Attorney Jacobs writes in her article that,

"For several years, financial advisors have been warning their clients that Congress might curtail some popular estate planning tools. The House of Representatives took a giant step in that direction on March 24 when it passed H.R. 4849—a bill that would eliminate the low-risk grantor retained annuity trust or GRAT.

Assuming the Senate follows suit, it will still be possible to use these trusts, but they will become much less attractive as a tool for shifting wealth to future generations. Before that happens, there is a window of opportunity to tap into the huge gift-tax savings now associated with a GRAT."

Attorney Jacobs' article then goes on to discuss how to tap into the tax-savings associated with a GRAT before it's repealed entirely. So, if you already have a GRAT or are just thinking about one, you should take a look at Attorney Jacobs' article, which you can find here.

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