The Questions that Clients are Asking Us - Part 2
Are you curious about what’s being talked about inside our advisor/client meetings nowadays? Well, we’re going to give a few more examples in this article. This is part 2 of the series, so stay tuned for more Q&A’s in the future.
HighPoint Advisors, LLC provides a large range of advice and services to a large range of clients. Our advisors conduct hundreds of meetings each year, and our advice addresses both the many questions we’re asked as well as the feedback that we receive from our clients. Below is a sampling of answers to some of the questions that our advisors are being asked.
Serving clients throughout Central New York, as well as communities across the country, HighPoint Advisors, LLC regularly hears questions about the financial issues that matter most to individuals, families, and business owners. Our advisors’ conversations with clients often center on topics such as retirement planning, investing, market conditions, taxes, estate planning, business finances, and preparing for the future. Because these questions can vary based on each client’s circumstances, goals, and stage of life, our team takes a personalized approach to providing answers and guidance. The questions we hear in our advisor/client meetings also give us valuable insight into the financial concerns and priorities of the clients we serve.
Question: I’m going to be 73 years old this year, so how do I handle the distributions that the IRS requires me to take out of my retirement accounts?
Answer: The IRS requires you to take annual distributions from pre-tax retirement accounts starting at the age of 73 and continuing for the rest of your life. This is called a Required Minimum Distribution, or RMD. The RMD represents the minimum amount of money that you must withdrawal for a given year.
The RMD is an annual requirement which is ultimately the responsibility of the account holder, and the IRS will impose a 25% penalty if a client doesn’t take the required amount. We don’t want that to happen to any of our clients, so HighPoint Advisors, LLC is here to help. We have put a process in place at our firm to alert and guide our clients through these distributions.
Your retirement accounts may be held directly at a broker/dealer, annuity company, mutual fund company, and other third-party custodian. Each of these companies have their own processes for handling the distribution of RMDs – either as a one-time occurrence or as automatically occurring annual distributions. We are knowledgeable with regard to the process that various companies follow and will help you meet the deadline annually.
Your Required Minimum Distribution can be sent to you by check or via direct deposit to your bank account. Regardless of how it’s sent to you, the amount will be considered fully taxable ordinary income for the year in which you received it. Some individuals elect to have part or all of their RMD sent directly to one or more of their favorite charities, which can make the donated amount of the RMD tax-free. This can be a powerful way for you to benefit charity while still receiving a tax benefit.
Question: Can I name my minor children as beneficiaries on my investments?
Answer: Yes, you can…. but there are better options.
It is always a good idea to name a beneficiary on an account if you have the opportunity to do so. If an account has a named beneficiary on file, and the account owner dies, then the assets of that account will pass directly to the person or entity listed as beneficiary. That’s a far better – and usually much quicker – outcome than if the account was required to go through the probate process. Probate is the process of dealing with assets and property that do not have a beneficiary listed. Probate usually requires the involvement of lawyers, the court system, the executor of the deceased’s will, not to mention the financial cost and many months of time in most cases.
When opening a new account, you may be asked to provide beneficiaries for your retirement accounts and even your after-tax non-retirement accounts. Best practices usually include naming an adult person or an entity such as a trust or charity. Naming a minor child as beneficiary is rarely ever a good idea.
An unfortunate situation happens when a minor inherits money. Minors can legally inherit money but cannot legally manage it. That means an adult or other guardian must be in charge until the minor reaches the age of majority. Unless proper planning is done in advance, the process of having a guardian appointed and an account set up is lengthy and frustrating.
Instead of naming a minor child as beneficiary, consider naming a Trust or adult family member, if applicable. Trusts are complicated, so we won’t go into it here, but naming a trust that is designed to protect and care for a minor child can be an option. A trust can even be created as a function of your Last Will & Testament and could guide both who will take care of your children (Guardian) on a daily basis as well as who will take care of the financial affairs of your children (Trustee).
Another option that doesn’t involve probate or lawyers is the Uniform Transfer to Minors Act. An account established under UTMA rules allows a minor to receive death benefits without a court-appointed guardian or trustee. A custodian (similar to a guardian) must be named for the minor, and that custodian manages the minor’s account until the child is of majority age under the applicable state’s UTMA rules.
The advisors at HighPoint Advisors, LLC have relationships with multiple estate planning attorneys. If you are in need, we are happy to make a referral for you if you do not work with one already. Our advice is to make sure you work with legal professionals that specialize in estate planning. You don’t want someone that helps with parking tickets or personal injury handling advice on the protection of your life savings!
Question: I am moving to a new location across the country. Will we still be able to work together?
Answer: Yes. While meeting in-person is always nice, it is not required.
Technology continues to advance and enhance the ways that we can communicate with our clients. Nowadays, we regularly carry out full meetings via virtual meeting platforms (such as Zoom, for example) or phone calls. Routine and more frequent communications are easily handled using email and texting.
We also have multiple capabilities related to other types of interactions. We have platforms for signing and handling documents remotely, portals for online account access, and even systems banking and money movement.
Our advisors work with clients that live near our office in Syracuse, NY, as well as many other parts of the country. We are prepared to meet clients wherever they are and however is most convenient for them.
Bring your Questions to Us
If you have your own questions that aren’t addressed in this article or previous articles in this series or need help with your own planning, ask us. While this article continues to answer the burning questions we get asked, it only scratches the surface of the topics that we routinely discuss with our clients.
At HighPoint Advisors, LLC, our advisors are in the business of helping individuals, families, and small business owners with any aspect of their financial journey. We’re here to make sense of the noise and help clarify your next step in your plan.
Contact us today to ask your questions.
This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
High Point Advisors, LLC and LPL Financial do not provide legal or tax advice. Please consult with your tax or legal advisor regarding your personal situation
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial. They also have access to non-affiliated third parties that specialize in creating trusts and wills for use by LPL advisor’s clients.