Financial Strategies

“To Convert, Or Not To Convert”….No Income Limits on Roth IRA Conversions Beginning January 1, 2010

roth_20iraPart of the 2006 tax reconciliation bill is about to matter to many of us come January 1, 2010. It’s sort of a good-news/bad-news deal — but more good than bad for many. As of January 1, 2010, there will be no income limits for those who want to convert a traditional IRA to a Roth IRA. That’s good because in the past, households with an adjusted gross income of more than $100,000 have been barred from converting their IRAs to Roth IRAs, and married spouses filing alone have been barred regardless of their income.

As a quick refresher, Roth IRAs are retirement savings accounts where you pay the income taxes due up front (when you contribute to the account) — then, it grows tax-free and your withdrawals are also tax-free (but you don’t get the income tax deduction when you initially contribute the money).

So, for those of you whose traditional IRAs are now worth far less than they used to be worth (that’s the bad news part), converting to a Roth IRA in 2010 could be a great idea: Since the account is now worth so much less, the taxes on the conversion will also be much less than they might have been, and if tax rates go up in the future, as many predict they will, you’ll have already paid the taxes due on the account.

For a good analysis on the ins and outs of the new rules, check out this Wall Street Journal online article. And, as always, please contact our firm for advice tailored to your specific situation…happy reading!


Michael Jackson’s Death: A Universal Wakeup Call for Unprepared Parents

michaeljackson_2414920bIf anything good comes out of Michael Jackson’s untimely death at all, it will be the universal wake-up call to parents around the globe that says, “You must name guardians for your children in the event of your death or incapacity!”

With a custody battle brewing between the Jackson Family, Michael’s nanny, and the biological mother of Michael’s children (who might not be the biological mother after all according to reports), in addition to the battle between creditors over his estate, news outlets are finally reporting on the absolute necessity of estate planning for all families with children and what the absence of it means for parents across the globe.

Parents rich and poor, young and old must realize it’s time to put the “It won’t happen to me” or “I’ll worry about it later” mentality aside when it comes to estate planning and doing what’s necessary to protect your kid’s well-being and care if, and when you can’t be there.

Michael Jackson had a slew of lawyers who handled his affairs. You would think someone, somewhere would have taken the time to explain exactly what would happen to his children and his assets if he passed away suddenly-or even found himself unable to care for the kids due to his drug addiction or complications from Lupus.

Clearly, if Michael Jackson’s estate planning could fall through the cracks, imagine the millions of people that would find themselves legally unprepared should the worst happen to them or someone they love. Maybe even you.¬†Unfortunately, you cannot predict how or when you will die- but you absolutely can dictate how your children and your assets will be handled after your death with advanced legal planning.

One of the common myths about estate planning is that “It’s just for rich people” or “it’s only necessary for old people”- neither of these excuses can be any further from the truth!¬†The truth is … if you have a child, whether you have $10 or $10 million dollars, you MUST at a bare minimum name legal guardians for your child in the event of your inability to care for them. Naming guardians includes both short-term guardians for the immediate term and long-term guardians.

It doesn’t matter how old you are or how close you are with your family, if you don’t put guardianship decisions in writing, your child could end up in the middle of a very messy custody battle-or even worse-in the care of the state foster system!

So, use this horrible event as a wake-up call and take control of your future and that of your kids! Don’t wait another day to document exactly who you want to raise your children if something happens to you before they can care for themselves. Take the time to document the values you’d want passed on to your kids and how you’d want them to be raised if you were no longer around.

Do these things NOW before it’s too late, or the court may end up making these choices for you, to the detriment of your kids. And share this article with a friend or family member who has little kids at home. They’ll thank you for it.