Retirement Planning in New York

Serving Clients in New York City and the New York Metropolitan Area

Introduction

Retirement funds represent a valuable asset and thus are an important segment of a retired person’s income picture. The attorneys of Grimaldi Yeung Law Group are uniquely qualified to assist you and your family in maximizing your retirement benefits.

Retirement accounts such as IRAs, 401(k)s and 403(b)s are tax deferred savings and are an important source of income in the later, non-working years. Funds deposited into retirement accounts are not subject to income tax until they are distributed. Taxes are paid at the time of distribution or withdrawal.

It is generally best to defer income distributions as long as possible from tax deferred retirement accounts governed by ERISA or other tax laws. Distributions from qualified tax deferred retirement accounts can begin at age 59-1/2 without penalty, however, income tax will be due upon receipt of their funds. If you are younger than 59-1/2, and want to take a distribution, you may do so without penalty in exceptional circumstances, such as to pay medical expenses. This may be done only if certain requirements are met. As such, properly timed distribution can result in maximizing these assets and minimizing the tax.

You may decide when and how much you wish to withdraw from your qualified tax deferred retirement plan. Minimum distributions from retirement accounts are required after a certain age set by federal tax law. As of 2024, the age has been set at 73. Generally, it is advisable to take only minimum distributions, or what you need to maintain your lifestyle. However, in a year when substantial medical deductions will be taken, it may be advisable to take a larger distribution. The deduction can offset the income tax liability on the distribution. Consult with a financial planner or with the attorneys at Grimaldi Yeung Law Group before taking this step. We can offer sound counsel before you take large retirement fund distributions.

Roth IRAs

Roth IRAs are an innovative retirement option that has certain tax advantages. Roth IRAs are funded with income which has already been subjected to income tax. Provided certain requirements are met, the Roth IRA funds grow tax-free and are not subject to additional income tax when withdrawn by the account holder. The restrictions vary according to law, but generally include:

• A minimum time for the account to be open before withdrawals can be made
• A minimum age of the account holder before anything other than the principal can be withdrawn
• An income phase-out, which generally tends to allow those with lower adjusted gross incomes to contribute a higher percentage of their incomes to Roth IRAs

Unlike traditional IRAs, there are no requirements that funds be withdrawn at a certain time. However, the apparent tax advantages may not be realized depending on how long you live, your income tax rate once you begin to withdraw funds, and other factors. Seek the advice of a qualified adviser, CPA, or your Grimaldi Yeung Law Group attorney to determine whether the Roth IRA is a retirement savings option appropriate for your estate plan.

Designating A Beneficiary

Retirement funds allow for the naming of a beneficiary upon death. It is imperative that you regularly review the designation of beneficiary on each account and confirm that each financial institution has the correct designation of beneficiary form on file. Each account should designate both a primary and a contingent beneficiary. It is almost never advisable to designate the Estate as the beneficiary. This results in an accelerated income tax on the full amount in the retirement account.

Most married couples are advised to designate their spouse as primary beneficiary, as the spouse has the unique ability to roll over the IRA into his or her own IRA, and also to designate new beneficiaries. This gives the survivor (spouse) a second chance to postpone the income tax payment during the survivor’s lifetime. Only a spouse can roll an account over into his or her own IRA. In certain circumstances, a Trust can be a beneficiary of an IRA, but special drafting is required.

Medicaid Planning

Medicaid applies special rules to retirement accounts. The principal held in a retirement account can be exempt if the Medicaid recipient receives regular income distributions. Our firm can help to protect these valuable retirement accounts by coordinating retirement and Medicaid planning.

In Medicaid planning, if the spouse is a retirement account beneficiary and also on Medicaid, Grimaldi Yeung Law Group can determine an optimum alternate plan. Designating the children as the beneficiaries of the retirement accounts may be a better option. When the  IRA policy beneficiary is receiving Medicaid benefits, upon receipt of the income it will change the Medicaid eligibility. Also, if the designated beneficiary child is disabled, a Special Needs Trust should be established for this beneficiary. Again, our firm has substantial expertise in the establishment of Special Needs Trusts and other protective Trusts and can balance the benefits and cost of each option.

529 Plan: Retirement Funds For Grandparents

Education Savings – An Estate Tax Savings Plan For Grandparents

Many retirees wish to provide for their grandchildren’s education. College or Educational Savings are often referred to as 529 Plans or Uniform Gift to Minors Plans.These plans can structure tax exempt gifting to your grandchildren. If you wish to contribute to a family member’s education, 529 Plans allow you to accelerate your gifts by making up to 5 years of exempt gifts at one time.

This amount is established annually by the federal government. It is indexed for inflation and will increase in time. The amount in the Savings Plan is specified for education and related uses for the individual.The fund can grow, tax-free. If the college fund is not used and not spent on education and related expense, or needed for education, it is returned to the owner of the fund (for example, the grandparent) and the owner will be liable for the deferred income tax accrued. It may be shifted to another plan for another 529 educational plan.

An Essential Part Of The Estate Planning Picture

In summary, IRAs have become a major source of family wealth, as they provide income stability during the later years. Decades of deferred income tax savings can allow retirees to build a savings nest egg. Grimaldi Yeung Law Group welcomes the opportunity to advise you to make the most of your retirement savings.

Contact Grimaldi Yeung Law Group today for assistance.