When Should You Have ‘The Talk’ with Your Kids? – Annapolis and Towson Estate Planning

Talking about who will control your assets is always a tricky thing, says AARP.org in a recent article “Do Your Kids Know Where to Find All Your Money if Tragedy Strikes?” The risk of adult children being caught unawares or without access to a parental funds could lead to big problems, if the parents should die or become incapacitated unexpectedly. Experienced estate planning attorneys know the conversation is better had now, than pushed into the background with a giant surprise in the future.

When a parent’s finances are revealed only after their death, or if dementia strikes, the unexpected responsibility can create a lot of stress. However, there are also reasons not to tell. If a child has a substance abuse problem, or is in a bad marriage, this information may be best kept under wraps. There is no one-size-fits-all solution. However, there are some universal rules to consider.

Short on cash? Do not make a secret of it. If you might end up needing help during retirement, it is best to tell your children early on. Family members have helped each other since there were families, but the earlier you involve them, the more time they have to help you find more resources and make plans.

Dealing with big numbers? You might want to wait. The amount of money you have worked a lifetime to save may look like an endless supply to a 22-year old. When young adults learn there is a pot of gold, things can go south, fast. If you have a spouse and are relatively young and healthy, then all the children need to know, is that you are well set for retirement. By the time you are closer to 80, then your children and/or a trusted financial representative and your estate planning attorney will need to know where your money is and how to access it.

How to share the details? Start by making a complete list of all of your assets, including account numbers, key contacts and any other details your executor or agents will need to handle your affairs. Put that information into an envelope and make sure that your children or your estate planning lawyer know where it is. If the information is kept on your computer or on an online portal, make sure the right people have access to the passwords, so they can access the information.

How to share the big picture? Estate planning attorneys often recommend a family meeting in their offices, with all of the children present. It is helpful to have this meeting happen in neutral territory, and even children who tend to squabble among themselves behave better in a lawyer’s conference room. You can explain who the executor will be, and why.

Introduce them to your team. Chances are you have a long-standing relationship with your estate planning attorney, financial advisor and accountant. These are the people your children will be working with after you have passed. Having them meet before you die or become incapacitated, will be better for a working relationship that will likely occur during a stressful time.

Reference: AARP.org (April 24, 2020) “Do Your Kids Know Where to Find All Your Money if Tragedy Strikes?”

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Why Gifting during Volatile Markets Makes Sense – Annapolis and Towson Estate Planning

Gifting assets to a trust for children or grandchildren is often an important part of an estate plan. The recent article “Is Now a Good Time to Make a Gift?” from The National Law Review takes a close look into the strategy of placing non-cash assets into a trust, without exceeding the annual gift tax exclusion amount or the Federal Gift Tax Exemption. If those assets increase in value later, the increases will further enhance the gift for beneficiaries.

Taxes on gifts made to a trust to benefit children and grandchildren are based primarily on the value of the gift. Annual exclusion gifts, that is, transfers of assets or cash that do not exceed the annual gift tax exclusion, are currently set at $15,000 per recipient per year. A married couple may give up to $30,000 per person in any calendar year. Many annual exclusion gifts do not require a Federal Gift Tax Return (Form 709), although it would be wise to speak with an estate planning attorney to make sure that this applies to you, since every situation is different.

Annual exclusion gifts are one way to reduce the overall value of the estate, but they do not reduce the Federal Estate Tax Exemption of the person making the gift.

Gifts in excess of the annual exclusion amount may still avoid gift taxes, if the person making the gift applies their gift tax exemption by filing IRS Form 709. The gift tax exemption is unified with the estate tax exemption, at $11.58 million per person in 2020. Gifts that are bigger than the annual exclusion of $15,000 per year, reduce the $11.58 million exemption for purposes of both the gift tax and the estate tax.

For example, if a person were to make taxable gifts of $1.0 million to a child in 2020, their lifetime gift tax and estate tax exemption will be reduced to $10.58 million. If that person were to die in 2020 when the applicable estate tax exemption is $10.58 million, then only estate assets in excess of the exemption will be subject to estate tax.

Given the uncertainly of the gift and estate tax exemptions, management and timing of these gifts is particularly important. If no legislative action occurs, these generous estate and gift tax exemptions will sunset at the end of 2025. They will return to the 2010 level of $5.0 million, indexed for inflation.

The exemptions need to be carefully used and budgeted, because federal estate tax starts at 18% and rises to 40% on all amounts over the exemption. Like the exemption, these rate rates may be changed by future elections and/or tax law changes.

If you are concerned about an estate becoming taxable, the current decline in asset values makes this a good opportunity to transfer more of the estate into trust for beneficiaries. The transfers can decrease the impact of a reduction in the exemption amount, as well as any changes to the tax rates. The currently reduced value of stocks and many other investments may also present an opportunity to reduce future taxes.

The best way forward would be to have a conversation with an estate planning attorney to review your overall estate plan and how moving assets into trusts during a time of lowered value could benefit the estate and its beneficiaries.

Reference: The National Law Review (April 10, 2020) “Is Now a Good Time to Make a Gift?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

If Not Now, When? It is the Time for Estate Planning – Annapolis and Towson Estate Planning

What else could possibly go wrong? You might not want to ask that question, given recent events. A global pandemic, markets in what feels like free fall, schools closed for an extended period of time—these are just a few of the challenges facing our communities, our nation and our world. The time is now, in other words, to be sure that everyone has their estate planning completed, advises Kiplinger in the article “Coronavirus Legal Advice: Get Your Business and Estate in Order Now.”

Business owners from large and small sized companies are contacting estate planning attorney’s offices to get their plans done. People who have delayed having their estate plans done or never finalized their plans are now getting their affairs in order. What would happen if multiple family members got sick, and a family business was left unprotected?

Because the virus is recognized as being especially dangerous for people who are over age 60 or have underlying medical issues, which includes many business owners and CEOs, the question of “What if I get it?” needs to be addressed. Not having a succession plan or an estate plan, could lead to havoc for the company and the family.

Establishing a Power of Attorney is a key part of the estate plan, in case key decision makers are incapacitated, or if the head of the household cannot take care of paying bills, taxes or taking care of family or business matters. For that, you need a Durable Power of Attorney.

Another document needed now, more than ever: is an Advance Health Care Directive. This explains how you want medical decisions to be made, if you are too sick to make these decisions on your own behalf. It tells your health care team and family members what kind of care you want, what kind of care you do not want and who should make these decisions for you.

This is especially important for people who are living together without the legal protection that being married provides. While some states may recognize registered domestic partners, in other states, medical personnel will not permit someone who is not legally married to another person to be involved in their health care decisions.

Personal information that lives only online is also at risk. Most bills today do not arrive in the mail, but in your email inbox. What happens if the person who pays the bill is in a hospital, on a ventilator? Just as you make sure that your spouse or children know where your estate plan documents are, they also need to know who your estate planning attorney is, where your insurance policies, financial records and legal documents are and your contact list of key friends and family members.

Right now, estate planning attorneys are talking with clients about a “Plan C”—a plan for what would happen if heirs, beneficiaries and contingent beneficiaries are wiped out. They are adding language that states which beneficiaries or charities should receive their assets, if all of the people named in the estate plan have died. This is to maintain control over the distribution of assets, even in a worst-case scenario, rather than having assets pass via the rules of intestate succession. Without a Plan C, an entire estate could go to a distant relative, regardless of whether you wanted that to happen.

Reference: Kiplinger (March 16, 2020) “Coronavirus Legal Advice: Get Your Business and Estate in Order Now.”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What’s the Best Way to Provide for My Family when I’m Gone? – Annapolis and Towson Estate Planning

The estate planning process should begin when you are at least 18 years old, of sound mind and as free as possible from emotional stress, suggests Essence’s recent article entitled “Death And Money: How To Protect And Provide For The Loved Ones You Leave Behind.” You do not want to do this kind of planning when you are on your sickbed or when your mental capabilities are in decline.

If you are new to estate planning, here are the necessary steps to ensure you start the process on the right foot. Work with an experienced estate planning attorney to be certain that your plan is correct and legal.

A will. This is a legal document that details how to distribute your property and other assets upon death. A will can also nominate guardians for minor children. Without this, the state will dictate how to distribute your assets to your beneficiaries, according to the laws of intestate succession. If you already have a will, be sure it is updated to reflect an accurate listing of assets and beneficiaries that may be changed with a divorce, financial changes, or the birth or adoption of a child.

Life insurance. This is a great idea to protect and provide for your family when you are gone. Life insurance pays out money either upon your death or after a set period. Even if you have a life insurance policy as an employee benefit, this coverage is not portable, which means it does not follow you when you switch jobs. This can result in gaps in coverage at times when you may need it most.

Work with a legal professional. Estate planning is not a DIY project, like cleaning the garage. You should have the counsel and assistance of an experienced estate planning attorney to help you create a comprehensive estate plan. An estate planning attorney can also coordinate with your financial advisor to manage your estate’s finances, such as making recommendations and funding investment, retirement and trust accounts.

An estate planning attorney also can make sure that all of your beneficiaries and secondary beneficiaries are up-to-date on your investment accounts, pensions and insurance policies. An estate planning attorney will also help you with the best options for maintaining your estate after death or in the event of incapacity. In addition to preparing a will, your attorney can create a living trust that details your desires regarding your assets, your dependents and your heirs while you are still alive. He can also draw up your power of attorney for your health care, verify property titles and create legal document to ensure a succession plan for your business.

Finally, an estate planning attorney or probate attorney can help the personal representative or executor of an estate with closing responsibilities setting up an estate account, tax filings and paying the final distributions to beneficiaries.

A key to estate planning is to get (and stay) organized. Know the location and passwords (if applicable) of all your important legal and financial documents. You should also communicate the location of these files to trusted family members and to your estate planning or probate attorney.

Reference: Essence (Jan. 29, 2020) “Death And Money: How To Protect And Provide For The Loved Ones You Leave Behind”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Do You Need a Revocable Trust? – Annapolis and Towson Estate Planning

A will lets you determine how your property will be distributed when you die, and a revocable living trust also accomplishes that task. However, the owner of the trust can make strict stipulations about how specific assets should be distributed, says Barron’s in the article “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work.” Another advantage of a revocable trust—avoiding probate, which gives the trust owner far more control over asset distribution.

Remember, probate is a process that takes place under the supervision of a judge in a court. Things do not always happen the way the decedent may have wanted.

It is best for individuals or couples with complex estate planning needs to meet with an estate planning lawyer, who will discuss whether a living trust is the right option. One question couples should ask: does it make sense for them to have a living will, and should it be a joint trust, or should it be two separate ones?

When a trust is created, it needs to be funded. Assets such as real estate, bank accounts, taxable non-retirement investment accounts all need to be retitled so they are owned by the trust. The person who creates the trust has no restrictions as to how the assets within the trust are used while they are alive. The trust can also be revoked during the owner’s lifetime, but it is more common for owners to make tweaks to the trust.

Trusts are very popular in states like California and Massachusetts, which have more restrictive probate laws than other states. Trusts are very good for people who own property in multiple states and would otherwise have to deal with probate in multiple states. Trusts are also excellent for people who wish to maintain privacy about their assets, since the trust’s contents remain private. A will, once it enters the probate process, becomes a public document.

Someone who does not own his or her own home and has limited assets may prefer to use a will, which is less expensive and simpler than a trust. Once they do own a home and have more extensive assets, they can always have a trust created.

A living trust is part of a larger estate plan. Other estate planning documents are still needed, including a durable power of attorney for finances, an advance health care directive, a nomination of guardianship for families with minor children and a living will.

People who have revocable trusts should ask their estate planning attorney about something called a “pour-over” will. This is a will that ensures that any assets accidentally left out of the trust are added to the trust after the death of the owner. If the majority of assets are in the trust, the probate of the pour-over will should be much simpler and there may even be a “fast-track” option for assets under a certain dollar level.

Reference: Barron’s (February 22, 2020) “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Is There Estate Tax on the Property I Inherited? – Annapolis and Towson Estate Planning

The vast majority of those who inherit real estate don’t end up paying any taxes on the property. However, there are some instances where estate or inheritance taxes could be assessed on inherited real estate. Motley Fool’s recent article, “Do You Have to Pay Estate Tax on Real Estate You Inherit?” provides a rundown of how estate taxes work in the U.S. and what it means to you if you inherit or are gifted real estate assets.

An estate tax is a tax applied on property transfers at death. A gift tax is a tax levied on property transfers while both parties are alive. An inheritance tax is assessed on the individual who inherits the property. For real estate purposes, you should also know that this includes money and property, and real estate is valued based on the fair market value at the time of the decedent’s death.

Most Americans don’t have to worry about estate taxes because we’re allowed to exclude a certain amount of assets from our taxable estates, which is called the lifetime exemption. This amount is adjusted for inflation over time and is $11.58 million per person for 2020. Note that estate taxes aren’t paid by people who inherit the property but are paid directly by the estate before it is distributed to the heirs.

The estate and gift taxes in the U.S. are part of a unified system. The IRS allows an annual exclusion amount that exempts many gifts from any potential transfer tax taxation. In 2020, it’s $15,000 per donor, per recipient. Although money (or assets) exceeding this amount in a given year is reported as a taxable gift, doesn’t mean you’ll need to pay tax on them. However, taxable gifts do accumulate from year to year and count toward your lifetime exclusion. If you passed away in 2020, your lifetime exclusion will be $11.58 million for estate tax purposes.

If you’d given $3 million in taxable gifts during your lifetime, you’ll only be able to exclude $8.58 million of your assets from estate taxation. You’d only be required to pay any gift taxes while you’re alive, if you use up your entire lifetime exemption. If you have given away $11 million prior to 2020 and you give away another $1 million, it would trigger a taxable gift to the extent that your new gift exceeds the $11.58 million threshold.

There are a few special rules to understand, such as the fact that you can give any amount to your spouse in most cases, without any gift or estate tax. Any amount given to charity is also free of gift tax and doesn’t count toward your lifetime exemption. Higher education expenses are free of gift and estate tax consequences provided the payment is made directly to the school. Medical expense payments are free of gift and estate tax consequences, if the payment is made directly to the health care provider.

Remember that some states also have their own estate and/or inheritance taxes that you might need to consider.

States that have an estate tax include Connecticut, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. The states with an inheritance tax are Iowa, Kentucky, Nebraska, New Jersey and Pennsylvania. Maryland has both an estate and an inheritance tax. However, there are very few situations when you would personally have to pay tax on inherited real estate.

Estate tax can be a complex issue, so speak with a qualified estate planning attorney.

Reference: Motley Fool (December 11, 2019) “Do You Have to Pay Estate Tax on Real Estate You Inherit?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Get Withdrawals from Retirement Accounts Right to Avoid Harsh Penalties – Annapolis and Towson Estate Planning

The next part of retirement is the “distribution” phase. That means spending those assets you’ve worked so hard to accumulate. Planning for this phase doesn’t always get the same attention as saving. However, it is just as important.

Forgetting to take required minimum distributions (RMDs) from IRAs by the due date, brings a nasty penalty: 50%. Let’s say you were supposed to withdraw $4,000 and didn’t. You’ll need to write a check to Uncle Sam for $2,000. To avoid this and other surprises, says Yahoo Finance in “Retirees Should Know These 3 Facts About Required Minimum Distributions.”

The IRS rule requires account owners to withdraw a specific amount from any qualified accounts, when the owners reach 70½. The reason is to make sure that people take the money, so the government gets tax revenues. Without it, people would live from other income and never pay taxes, leaving money to family and keeping it from the IRS.

Here’s what retirement account owners need to know about RMDs:

Retirement Accounts with RMDs include: IRAs 401(k)s,. 457 plans, TSPs, 403(b)s, SEP, Simple IRAs.

Required Withdrawals begin by April 1 of the year following the calendar year in which you turn 70½. For every subsequent year after a required beginning date, RMDs must be taken by December 31. Roth IRAs do not have RMDs.

How do you Calculate the RMD Amount? This can get a little tricky, so don’t hesitate to ask your financial advisor or CPA for help. Divide your earlier year’s December 31 retirement account balance by a “distribution period,” based on your age. Here is an example, let’s say that Marcey is 70 and must take her first RMD in the year she reaches 70½. The year-end balance of her IRA was $100,000. Her “distribution period” factor is 27.4. Dividing $100,000 by 27.4 is $3,649.63. That’s the amount she must take for the calendar year in which she turns 70½.

Reference: Yahoo Finance (December 13, 2019) “Retirees Should Know These 3 Facts About Required Minimum Distributions”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Should I Use a Home Equity Loan to Float my Retirement? – Annapolis and Towson Estate Planning

Many retirees—and those nearing retirement—have put much of their savings in traditional IRAs or 401(k)s, which are tax-deferred methods for accumulating wealth. In addition, taxpayers may decide to use other tax-deferred accounts to avoid interest, dividends, and capital gains from spilling into their tax returns. These strategies can help taxpayers decrease income and taxes.

However, Kiplinger’s recent article, “How You Can ‘TAP’ into Home Equity to Help Keep Your Retirement Stable,” says that once we “turn on the faucet” and withdraw money from these tax-deferred accounts, additional income will have to be claimed on our tax returns. Instead, retirees can make moves that will help them reduce taxes. A lesser-known tool to look at for tax-free income is a home equity line of credit, or HELOC, on your home.

Let’s examine two scenarios in which a HELOC may make sense in retirement:

An IRA drawdown. Let’s say that a typical married retired couple wants to stay in the 12% tax bracket as joint filers. They can withdraw up to $78,950 of taxable income from their IRAs to stay in this bracket in 2019. That amount goes up to $103,350, after adding the standard deduction of $24,400. Then, for any additional funds they may need during the year, they can use a HELOC. For example, if they take $15,000 out, they will actually receive $15,000 tax-free. However, if they take the same amount from their IRA, it would move them into the 22% tax bracket. As a result, they’d owe $3,300 in federal taxes, in addition to any state or local income taxes. Therefore, they only receive about $10,000 after taxes from their IRA withdrawal. The HELOC is tax-free, and the interest rate charged on a HELOC is generally low at this point. Depending on your purpose for the money, that interest may be tax deductible, and repayments can be planned over a multiyear term to be covered by future IRA distributions or other investment income. This spreads out the tax impact to continuously stay under tax bracket thresholds, keeping as much of your money in your hands as possible.

Emergency money. Unexpected expenses can arise, and if you don’t have funds available in a checking or savings account, the emotion of a stressful emergency may drive you to make impulsive (and costly) financial decisions. Instead of using a high-interest credit card or cashing out investments, a HELOC can be a wise move. Note that there are some HELOC disadvantages. The interest rate is variable, which means the monthly payment can be unpredictable, especially during times of rising interest rates.

There are other ways to use the equity in your home to create cash flow in retirement, but a HELOC may be best for some retirees, based on its flexibility for scenarios, such as future downsizing or the potential need for the cost of assisted living facilities down the road. A HELOC can be a very useful tool for a proactive and comprehensive cash-flow plan in retirement.

Reference: Kiplinger (October 8, 2019) “How You Can ‘TAP’ into Home Equity to Help Keep Your Retirement Stable”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Can Life Insurance Help My Estate Plan? – Annapolis and Towson Estate Planning

In the 1990s, it wasn’t unusual for people to buy second-to-die life insurance policies to help pay federal estate taxes. However, in 2019, with estate tax exclusions up to $11,400,000 (and rising with the cost-of-living adjustments), fewer people would owe much for estate taxes.

However, IRAs, 401(k)s, and other accounts are still 100% taxable to the individuals, spouses and their children. The stretch IRA options still exist, but they may go away, as Congress may limit stretch IRAs to a maximum of 10 years.

Forbes’ recent article, “3 Ways Life Insurance Can Help Your Estate Plan,” explains that as the IRA is giving income from the RMDs, it may also be added, after tax, to the life insurance policy. If this occurs, it’s even possible that the death benefits could grow in the future, giving a cost-of-living benefit to children. This is one way how life insurance can be used creatively to help your estate plan.

For married couples, one strategy is to consider how life insurance on one individual could be used to pay “conversion tax” at death, using tax-free benefits. When the retiree dies, the spouse beneficiary can then convert all the IRA (taxable money) to a Roth IRA, which is tax-exempt with new, lower income tax rates (37% in 2018-2025 versus 39.6% in 2017 or earlier).

This tax-free death benefit money can be used to pay the taxes on the conversion, letting the surviving beneficiary have a lifetime of tax-exempt income without RMD issues from the Roth IRA. The Social Security income could also be tax-exempt, because Roth withdrawals don’t count as “income” in the calculation to see how much of your Social Security is taxed. However, you’d have to be within the threshold for any other combined income.

Life insurance for both individuals (if married) may also be a good idea. If the spouse of the IRA owner dies, the money from the life insurance can be used once again. If this is done in the tax year of the death for married individuals, the tax conversion could be done under “married filing status” before the next year, when the individual must use single tax filing status.

Another benefit of the IRA-to-Roth conversion is the passing of Roth IRAs to heirs, which could create a lasting legacy, if planned well. New life insurance policies that add long-term care features with chronic care and critical care benefits can also provide an extra degree of benefits, if one of the insureds has health issues prior to death.

Be sure to watch the tax rates and possible changes. With today’s lower tax rates, this could be very beneficial. Remember that there are usually individual state taxes as well. However, considering all the tax-optimized benefits to spouses and beneficiaries, the long-term tax benefits outweigh the lifetime tax liabilities, especially when you also consider SSI tax benefits for the surviving spouse and no RMD issues.

Life insurance in retirement can help protect, build and transfer wealth in one of the easiest ways possible. If you’re not certain about where to start with your life insurance needs, speak with an experienced estate planning attorney.

Reference: Forbes (November 15, 2019) “3 Ways Life Insurance Can Help Your Estate Plan”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What’s the Best Way to Take My Required Minimum Distribution? – Annapolis and Towson Estate Planning

CNBC’s recent article, “These tips can help retirees make required minimum distributions easy and tax penalty free,” gives the steps to follow, so we don’t leave money on the table.

RMDs or required minimum distributions, are the minimum amount people age 70½ and older must withdraw from their retirement funds. If you’ve inherited a retirement account, you may also have to make a withdrawal. The amount you need to withdraw varies from year to year and is based on specific calculations, including what your account values were as of December 31 the prior year and your age.

The time to get started on your RMD for this year is right now, because the paperwork may take some time. You have until April 1, if you just turned 70½ this year. Let’s look at a few tips:

Get your paperwork organized. In order to know how much you have to withdraw, you have to have an accurate picture of what you own. Create a list of accounts and take an inventory first, so you know where all your retirement accounts are located.

Know what you can take from what account. If you have multiple IRAs, you can take your total RMD from any one of those accounts because of the aggregation rule. However, with multiple IRAs, you still must calculate the amount you take out based on the value of all of them. It’s that same with multiple 403(b) retirement accounts. The rule doesn’t apply to 401(k) plans. If you have multiple 401(k) accounts, you must take money from each one, and you can’t take an RMD from an IRA to satisfy a 401(k), or vice versa.

Understand the rules, if you’re still working. If you’re 70½ and still employed, you could get a break from taking your RMD in certain circumstances. Generally, 401(k) plans have a still-working rule, which stipulates that you don’t have to take the RMD until you retire. However, you can only delay the RMDs, if the plan is attached to the company where you’re currently employed. Other accounts from a previous employer are excluded, so you must still take distributions from those.

Keep an eye on any inherited accounts. If you’ve inherited a retirement account, you may have to take an RMD by the end of this year. That generally doesn’t apply if you inherited the money from your spouse, because spouses can do a rollover and keep postponing the distributions. However, if you’re a non-spouse beneficiary, you probably must take a distribution by the end of 2019. If you inherited the account in 2018, you’ll need to take your first RMD in 2019.

RMDs from a Roth IRA will likely be tax-free. However, if you’ve inherited one of these accounts and you didn’t take that money out, you’ll have to pay a 50% penalty on the funds you should’ve withdrawn.

Consider giving to charity. A good way to avoid paying taxes on your RMD, is to give the money to charity. A qualified charitable distribution lets you make donations to a charity directly from your IRA, instead of taking the RMD yourself. Therefore, if your RMD is $5,000, and you typically give $5,000 to charity each year, you can donate that money directly and not pay tax on it.

Reference: CNBC (November 29, 2019) “These tips can help retirees make required minimum distributions easy and tax penalty free”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys