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Is Your Spouse/Partner in Your Financial Loop?

In an interview on MsMoney.com, Kerry Hannon, author of Suddenly Single: Money Skills for Divorcees and Widows, said she wrote her latest book after seeing loved ones face financial difficulties, after becoming widowed or divorced. “Some didn’t even know where their investments, insurance policies and the like were, or have a grip on their cost of living,” Hannon told MsMoney.com.

Being clueless about the family finances isn’t a gender issue. Plenty of men rely on their wives to pay bills, put money aside for savings and retirement, and keep important documents safely stored. If you’re the one responsible for the household investing and finances, you need to make sure you are keeping your spouse/partner in the loop. That includes:

  • Knowing the names, firms and phone numbers for key advisors including your investment manager, accountant and estate attorney.
  • Knowing where key documents, such as insurance policies, copies of your wills and investment account statements, are stored.
  • Having an overall idea of your financial situation.
  • Knowing where all banking and investment accounts are held.

Even a non-working spouse should have an estate plan that includes cash and investments, real estate and insurance proceeds. Life insurance on the nonworking spouse can also help offset expenses, such as childcare that may be needed after her death.

If you have an elderly parent who is widowed or divorced, you may want to have the same discussion, If a parent plans to leave a sizable estate to a child, it’s important that the heir know where documents have been kept and which key advisors to contact.

If you have trouble figuring out what your spouse does and does not need to know, ask yourself this question: If tomorrow I were killed in an accident, what would my spouse need to know to ensure the family could survive financially?

THE BOTTOM LINE: Keep each other in the loop, know where important documents are located, and have a contingency plan for the unexpected. Know your deadlines, act in a timely manner and seek professional advice where needed.

Upon inheriting a traditional Individual Retirement Account (IRA) or assets from another retirement plan, you’ll need to make important decisions by deadlines that can easily slip by during emotionally difficult times.

These decisions will hinge on personal circumstances and factors that can be complex. Failing to act on time could have long-term repercussions and cost you serious money.

Start by getting together your paperwork – including the beneficiary designation form for the inherited account.

You may need help sorting out your options, but you must always keep the following deadlines in mind:

WITHIN NINE MONTHS FROM DATE OF DEATH, file a disclaimer if you so choose. Suppose you’ve inherited the IRA from your late husband. Meeting this deadline allows you, as primary beneficiary, to give up all or part of your interest in the IRA. But why forfeit those assets? It could help reduce income taxes and leave more to your child or grandchild. When you disclaim an IRA, assets pass to a contingent beneficiary such as your child or maybe a charity.

DEC. 31 OF THE YEAR OF DEATH is the date by which you may need to take a distribution. If the IRA owner had started taking required distributions after turning 70½ but did not take the distribution for the year he or she died, you must withdraw the full required amount or pay a penalty of 50 percent of the amount that should have been withdrawn.

SEPT. 30 OF THE YEAR FOLLOWING THE DEATH is the deadline for splitting the IRA into separate shares or accounts if multiple primary beneficiaries were named on the account. This is advantageous if a non-spouse inherits the IRA: He or she can take withdrawals over his or her individual life expectancy, which could reduce the size and tax consequences of mandatory distributions. This date also ends the period during which beneficiaries can disclaim or cash out their portions of the account. However, this is not a deadline for the surviving spouse to decide whether to leave the IRA in the deceased’s name or place the assets in the survivor’s account. A spouse can make that choice at any time.

OCT. 31 OF THE YEAR FOLLOWING DEATH is the deadline for the trustee (if a trust is beneficiary) to send the IRA custodian either a copy of the trust document or a certification of the trust’s beneficiaries and their rights to the IRA.

DEC. 31 OF THE YEAR FOLLOWING DEATH is the deadline by which many inheritors must take their first distribution from the account or suffer the 50 percent penalty. If an account that has cobeneficiaries is not split by this date, the younger inheritors will forever have to receive larger than necessary withdrawals. This could deplete the account faster than otherwise.

ALL ROTH IRA CONTRIBUTIONS are non-deductible, and all of the contributions are considered basis and can be withdrawn tax-free. The earnings also can be withdrawn tax-free as long as the account was held for more than five years (including the time it was held by the person from whom you inherited it).

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

* Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. Old National Bank & Old National Investments are not registered broker/dealers and are not affiliated with LPL Financial. Old National Bank, Old National Investments, and LPL Financial are separate entities.
-Not FDIC Insured -Not Bank Guaranteed -May Lose Value -Not insured by any Federal Government Agency -Not a Bank Deposit

Sandy Derby, CFP®, ChFC LPL Financial Advisor, VP Southwest Michigan Region 5003 Century Ave Kalamazoo, MI 49006 269-459-0474 oldnational.investments TM

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