March 7, 2021

Don’t Pay Tax Penalties on Money You Took From Retirement Accounts

If you’re using tax preparation software, the document should print out with the word “rollover” entered next to the zero, Mr. Slott said. Someone completing a paper form would need to write in the word “rollover.” That will treat the withdrawal as a nontaxable event. (Usually, R.M.D.s aren’t eligible for rollovers, but the I.R.S. made an exception for 2020.)

Some clients who returned their R.M.D.s have had pleasant surprises on their tax returns, Ms. Costa said. Because their taxable income is lower than it would have been, some were able to deduct medical expenses or even qualify for the federal stimulus payments.

But if the minimum distribution isn’t properly reported as returned, those benefits could evaporate, Ms. Costa said.

“You don’t want to add insult to injury by paying taxes on a distribution that you returned,” she said.

Here are some questions and answers about R.M.D.s:

Is it OK if I kept the retirement withdrawals I made in 2020?

Yes. Returning the money was optional.

Are R.M.D.s waived for 2021?

No. The waiver applied only to withdrawals in 2020.

When do I have to start taking R.M.D.s?

It depends. A federal law passed in 2019 called the SECURE Act, for Setting Every Community Up for Retirement Enhancement, raised the starting age for taking R.M.D.s to 72, from 70½.

The new age 72 threshold applies to those who turned 70½ after 2019 — or, put another way, those whose 70th birthday was July 1, 2019, or later. For everyone who turned 70 before that date, the starting age is 70½.

Article source: https://www.nytimes.com/2021/03/05/your-money/income-tax-retirement-account.html

A 10-Year-Old GameStop Investor Cashed In. His Return? Over 5,000%.

“All of a sudden, I heard ‘ding, ding, ding, ding, ding,’” Ms. Carr, 31, referring to the stock alerts, said in an interview on Friday. “I grabbed my phone, and I was looking at it, and it said $351. I was shocked: ‘I bought this thing at $6,’ I thought, ‘there’s no way this can be right.’”

Ms. Carr, a nutritionist, quickly pulled her son out of virtual learning and asked him what he wanted to do. “I was trying to explain to him that this was unusual,” she told mySanAntonio.com, a segment of the San Antonio Express-News. “I asked him, ‘Do you want to stay or sell?’”

Jaydyn decided to sell his shares, earning $3,200 — a return of more than 5,000 percent on an investment of about $60.

“I felt shocked and excited at the same time,” he said in a phone interview on Friday.

He said he had decided to save $2,200 and invest the remaining $1,000, most likely in shares of Roblox, a multiplayer gaming universe popular with young children, if and when the platform goes public.

“Long-term investing is important because that is how I got this money,” Jaydyn said.

The surge has piqued Jaydyn’s interests in amateur day trading. “He’s definitely ready to jump full force into the market,” his mother said.

Article source: https://www.nytimes.com/2021/01/30/business/gamestop-stock-profit.html

Dad, a Death Sentence and the Planner Who Set Us Straight

My siblings and I had always gotten on quite well, but we feared a breakdown in overall family dynamics if we weren’t careful, even as we were desperate to act fast to protect our dad and his wife as best we could. The living needed at least as much help as the client who was dying. To the three of us, at least, feelings were going to matter just as much as finance.

But on the most primal level, we were simply reeling in those first few months. A.L.S. is an unpredictable disease — one that could progress rapidly and remain challenging for a while, draining away assets that took a lifetime to accumulate. We didn’t quite know which task to tackle first.

A financial planner’s first course of action, though, is often rejiggering and simplifying investments while developing an all-new cash-flow plan. This was especially necessary in my father’s case. Years earlier, I’d had “the talk” with him: Don’t let a nice stranger sweet-talk you into a suite of proprietary, expensive, underperforming, actively managed mutual funds. But it didn’t take, and he’d done it anyway.

That was only the beginning. As Carl Richards, the former New York Times Sketch Guy columnist, is fond of saying, real financial planning is a process, not a collection of investment products.

Any illness that might mean a precipitous decline — whether A.L.S., Alzheimer’s or certain cancers — involves countless questions as the worlds of medicine and money collide. A good financial planner can answer them off the top of her head.

Some of these questions are immediately evident, even if some of the details vary. When do you start or stop a Medicare Advantage plan? When do you call in hospice, what do its workers do, and who pays? In this case, there were questions about navigating the Veterans Affairs system, a bureaucracy as befuddling as it can be generous. (Seriously, to whoever arranged the benefits for veterans with A.L.S., thank you. You might have kept Dad from zeroing out his assets altogether.)

Then there were things we never could have imagined. He gave up his car keys voluntarily, but would we have to ban his beloved red wine? Does it make sense for an A.L.S. patient to have a colonoscopy? And what about that feeding tube?

Article source: https://www.nytimes.com/2021/02/26/your-money/financial-planner-end-of-life.html

Home Buyers, Beware: ‘Views Are Not Guaranteed’

He said years ago that a condominium on Third Avenue in Manhattan — some four blocks from the East River — had tried to argue in court filings that its views were guaranteed. The court dismissed the motion. “Views are not guaranteed,” he said.

People buying into a large condo building should look at the offering documents to understand just what types of businesses can go into retail space in the building and who is paying the fees for upkeep, said Deborah Friedland, managing director in the real estate group at EisnerAmper, an accounting firm.

“There may be a Whole Foods there, but can someone come in and build a very low-end use for that commercial space?” she asked. “You want to understand how the fees are split between the condos and the retail unit. Are members responsible for a lot of the fees and common charges?”

Ms. Friedland added that buyers in an older building needed to understand the plans for the lobby and common areas, because renovating them can cost millions. When it comes to disputes among residents, “it’s always about the common area,” she said. “The charges can be tremendous.”

The same holds true for structures like docks, particularly those that have been there a while. Environmental rules for waterways have changed considerably, so what was once allowable may no longer be. There is no problem as long as the dock is in good repair, but if a storm knocks it out, the new owner may not be able to replace it.

“If you’re buying the property, you have to see if the dock is permitted,” Mr. Goldberg said. “If it’s not permitted and it gets washed away, you’re never going to rebuild that dock. If it is permitted, you at least have hope, if you can build it in whatever environmentally sensitive way is required.”

In Mr. Tracy’s case, the economic and environmental reasons for change aren’t straightforward. A desert preserve would not generate the revenue that a golf course does, and the city still has many more years of $1 million annual bond payments to make from when it renovated Tahquitz some two decades ago. There’s also the possibility of desert sand blowing through the neighborhood.

Article source: https://www.nytimes.com/2021/02/26/your-money/house-buying-pandemic.html

The Benefits of Putting Stimulus Aid in ABLE Accounts for the Disabled

If the money is deposited in an ABLE account, it doesn’t count toward the $2,000 cap. It can be saved or invested and spent later on a variety of disability-related needs that arise, like housing, transportation, education and training.

Disabled people working toward independence can save for a down payment for an apartment or a wheelchair-accessible car. Or the funds can be used to save for specialized therapy or legal fees.

“It’s incredibly helpful to save for those bigger expenses,” said Bethany Lilly, senior director of income policy with the Arc, a nonprofit organization that works on behalf of people with intellectual and developmental disabilities.

In the first round of stimulus payments, individuals got up to $1,200, based on income; in the second round, up to $600. The third round, which is subject to congressional negotiations, is expected to be $1,400, but income caps may be lower.

“By putting it into an ABLE account, it’s an emergency fund,” Ms. Morris of ABLE Now said. “It’s a really nice opportunity.”

Some families have hesitated to use ABLE accounts because some have high account and investment fees. Increasing the number of participants, account proponents say, could help bring down costs. Many states have formed partnerships to better market the accounts, said Andrea Feirstein, managing director of AKF Consulting Group.

Also, legislation reintroduced in Congress aims to expand the pool of people who qualify for the accounts. Currently, to be eligible for an ABLE account, someone must have been disabled by age 26. The ABLE Age Adjustment Act would raise the age threshold to 46. Such a move would increase the pool of eligible people to about 14 million, Ms. Feirstein said.

Article source: https://www.nytimes.com/2021/02/26/your-money/stimulus-able-savings-account.html

Disabled Recipients of Stimulus Aid Are Urged to Save Some in Special Accounts

If the money is deposited in an ABLE account, it doesn’t count toward the $2,000 cap. It can be saved or invested and spent later on a variety of disability-related needs that arise, like housing, transportation, education and training.

Disabled people working toward independence can save for a down payment for an apartment or a wheelchair-accessible car. Or the funds can be used to save for specialized therapy or legal fees.

“It’s incredibly helpful to save for those bigger expenses,” said Bethany Lilly, senior director of income policy with the Arc, a nonprofit organization that works on behalf of people with intellectual and developmental disabilities.

In the first round of stimulus payments, individuals got up to $1,200, based on income; in the second round, up to $600. The third round, which is subject to congressional negotiations, is expected to be $1,400, but income caps may be lower.

“By putting it into an ABLE account, it’s an emergency fund,” Ms. Morris of ABLE Now said. “It’s a really nice opportunity.”

Some families have hesitated to use ABLE accounts because some have high account and investment fees. Increasing the number of participants, account proponents say, could help bring down costs. Many states have formed partnerships to better market the accounts, said Andrea Feirstein, managing director of AKF Consulting Group.

Also, legislation reintroduced in Congress aims to expand the pool of people who qualify for the accounts. Currently, to be eligible for an ABLE account, someone must have been disabled by age 26. The ABLE Age Adjustment Act would raise the age threshold to 46. Such a move would increase the pool of eligible people to about 14 million, Ms. Feirstein said.

Article source: https://www.nytimes.com/2021/02/26/your-money/stimulus-able-savings-account.html

The Unequal Inheritance: It Can Work, or It Can ‘Destroy Relationships’

“She was not only getting the advantage of the bigger house, but she was depleting the inheritance,” Mr. Margolis said.

A better arrangement would have been if the daughter had borrowed, say, $500,000, from her parents, signing a promissory note that forgave $100,000 a year over five years, Mr. Margolis said. If the last parent died three years later, he said, the remaining $200,000 “would work as an advance on that daughter’s inheritance.” If the estate did not have enough assets to give her siblings their equal share, he said, “the daughter would have to come up with some funds to make up the difference.”

Mr. Margolis said families could avoid conflicts by drawing up a “personal caregiving agreement,” which would describe the services a caregiver will provide and the type and size of compensation, such as a loan to buy a house, regular payments, or a larger share of the estate. All siblings should be involved in the process, he said.

Divvying up an estate can be especially complicated in blended families. The growth in stepfamilies is a major reason the percentage of Americans 50 and older who left their children unequal bequests more than doubled, to nearly 35 percent in 2010 from 16 percent in 1995, according to a study published by the National Bureau of Economic Research.

“Parents without stepchildren were much more likely to treat all their kids equally than parents with stepchildren,” said Robert A. Pollak, the study’s co-author and professor of economics at Washington University in St. Louis.

But the study also found that the longer the relationship, the more likely a parent would leave a stepchild an inheritance equal to that of a biological or adopted child, possibly reflecting a strengthening in “trust and bonding.”

If a parent, say the husband, in a stepfamily wants to protect his children from a previous marriage, it is best to avoid leaving all assets to his wife in a will and hope she will keep a promise to leave remaining assets to her stepchildren when she dies, experts say.

Article source: https://www.nytimes.com/2021/02/19/business/estate-planning-inheritances-retirement.html

Raising Money for a Nonprofit? Try a Personalized Approach

“Sometimes everything feels too polished,” Ms. Choy said. “If they can make their solicitation as human as possible, it would work better. It shouldn’t be about putting someone on a pedestal.”

As donors themselves, she and her husband, Bernhard Krieg, have experienced some of the same issues. Several of their problems had to do with the organization’s follow-up. At times, Ms. Choy said, the couple have not been thanked for their gift or have been thanked too much. In one instance, her husband had to call multiple times to get a tax document for a donation. And they have been subject to the same overly broad questions her report identified as a problem.

“People are really looking for something more than a transaction” said Michael Wagner, co-founder of Omnia Family Wealth, which manages $2 billion for 60 families. “It’s about building a partnership based on a relationship. People used to be OK with just giving the money and being done with it, but that isn’t the case anymore.”

One factor is that donors have increasingly turned to what are known as impact investments — investments that seek to do good while earning a return. And donors are looking for similar ways to measure the effectiveness of their gifts.

Tyson Voelkel, the president and chief executive of the $2.2 billion Texas AM Foundation, said he had approached a large donor and his wife in the spring, when a significant number of the university’s students were having trouble staying in school because their parents had lost their jobs during the pandemic. Mr. Voelkel explained to the donor, who runs a large company, that it might take only $1,000 to keep a student in school. On the condition of anonymity, the donor eventually gave $500,000.

“In the year leading up to that phone conversation, I had been listening and asking what they were really interested in funding,” Mr. Voelkel said. “Traditional programs weren’t motivating to them, but this was. In that same conversation, I found out they’d be interested in doing more of this high-impact, quick-need funding.”

Mr. Voelkel’s approach led not with a dollar amount but with a specific need and stories to back it up. He wasn’t asking for a certain size donation in exchange for something like an endowed chair for a professor or a building. And in this case, as long as the need persisted the donor continued to give. He himself had chosen to attend AM over other universities because it offered $500 more in scholarship aid.

Article source: https://www.nytimes.com/2021/02/19/your-money/nonprofit-fund-raising.html

More Consumers Complain About Errors on Their Credit Reports

Lenders use the score as a snapshot of whether you’re likely to repay a loan. Scores may also be checked when you apply for a job or an apartment lease. The higher the score, the better. Paying bills on time and keeping credit card balances low help boost scores.

Because of the complexity of the credit reporting system, consumers may feel stymied when they find an error and try to fix it.

A student borrower in California, for instance, complained in December about a 200-point credit score drop because of “incorrect” information reported by a student loan servicer. The servicer said it wasn’t reporting flawed information and referred the borrower to the credit bureaus. The drop in the credit score prevented the borrower from taking steps like moving and buying a car, but “no one seems to help fix it,” the borrower wrote. “My credit score continues to drop after I’ve tried so hard to rebuild it.”

A similar situation is the subject of a lawsuit, cited by Consumer Reports, that a New Jersey woman filed against Equifax, TransUnion and VantageScore in Federal District Court last summer. The complaint says her student loan servicer, Navient, mistakenly reported her payments as late, even though they should have been reported as current under the federal relief program. The error caused her credit score to drop by almost 100 points, the complaint says.

Navient, which isn’t a defendant in the suit, corrected the mistake, but the credit bureaus didn’t update her credit score to reflect the change, the suit says.

The complaint claims that “thousands” of borrowers are in a similar situation, though a lawyer for the borrower, Philip L. Fraietta of Bursor Fisher in New York, said that number was an estimate.

A spokesman for Navient, Paul Hartwick, declined to comment on the lawsuit.

During the pandemic, Navient is reporting the payment status of student loans as instructed by the federal Education Department, he said. “If you have questions about a specific credit score, please contact the company that issued it,” Navient has advised borrowers.

Article source: https://www.nytimes.com/2021/02/19/your-money/credit-report-errors.html

The Question Some Company Owners Don’t Want to Deal With

C. John Bongiovanni, who has been president of Bon Tools since he father, Carl, died of a heart attack in 2017, said he had also dealt with a lack of a succession plan. But what made the initial transition especially difficult, he said, was the lack of insurance, which would have given him some breathing room to sort through the company’s finances and tend to its 70-plus employees.

“The toughest thing at first was to circle the wagons and figure out what was what,” he said. Key person insurance would have also relieved him of some of the pressure he feels to buy other parts of the business, like its real estate, from his mother and to begin to compensate his two sisters, who are not part of the business.

While he had worked at the company since he was young, Mr. Bongiovanni said, he had little idea what a transition might look like when his father, a fit, trim 59-year-old, died.

“My father and I would talk about business, but it was the exciting parts, not the down and dirty,” Mr. Bongiovanni said. “It was, ‘Oh, did you see that piece of business?’ I’m not sure we would have laid everything out, but I could have had his wishes.”

In these kinds of situations, said Erica Bramer, managing partner at the BVA Group, a litigation, valuation and financial advisory firm, the two main things to avoid are confusion over who is in charge and who knows what.

“The simplest form is the owner dies and it’s unclear how the business is going to pass to someone else,” Ms. Bramer said. “Let’s say there are multiple kids. What’s best for the family? What’s best for the business? What did Dad intend? Once you layer in other business partners or other employees who thought they owned part of the business, it becomes even more complicated.”

Mr. Baum at Interchange Capital Partners said he counseled clients who suddenly had to take control of a company to think in terms of damage control.

Article source: https://www.nytimes.com/2021/02/12/your-money/company-owners-succession.html