IRS Link to Form — Found Here The Form 706 is required not only if there is a tax implication for an estate, but also to claim exclusions. Each person has an exclusion of 5.49 Million as of 2017. For married couples, that goes double, such that heirs to an estate under $11 million probably will not owe any estate taxes. A surviving spouse should still report the inherited portion of the deceased spouse’s estate up to the exclusion amount, otherwise the exclusion will be lost. There are also lines for the lifetime gift exclusion amount and the generation skipping transfer tax. Continue reading...
IRS Link to Form — Found Here Form 706 is the Estate Tax return, and it has a section concerning Generation-Skipping Transfers. 706 GS (D), specifically, is the form which 706: GS (D-1) is the corresponding form if the transfer is associated with a trust, which is filed by the trustee. The Generation-Skipping Tax attempts to prevent an estate from transferring too many assets directly to grandchildren instead of children for the purpose of shielding heirs from estate taxes. The form for reporting Generation Skipping Transfers is 706 GS (D), where 706 is the Estate Tax Return filing. Continue reading...
Americans working abroad must report their earnings to the IRS, but they are allowed to avoid paying federal income taxes on an amount adjusted for inflation, which is just over $100,000 as of 2016. Americans working abroad often enjoy a few tax advantages. One of which is the Foreign Earned Income Exclusion. The reasoning is that they are probably paying some form of tax in the county in which they are working, even though this is sometimes not the case. Continue reading...
Workers who earn income in foreign countries will frequently pay taxes on the income in the country in which the wages were earned. In such cases the worker may be eligible to take deductions for the amount of taxes paid so that their entire income is not subject to taxes again in their country of citizenship. Ex-patriot workers who earn income overseas are generally eligible for tax deductions, credits, or exclusions to account for the taxes that they have already paid on their income in the foreign country. Continue reading...
Lifetime cost is the total amount of money that a good will cost a consumer over the entire course of ownership. This included related, add-on costs such as maintenance, fuel, insurance and so on. These costs can dwarf the actual purchase price of the item. Lifetime cost is also known as total cost of ownership (TCO), and it is a budgetary way to look at the expenses that go along with the purchase of an item. Continue reading...
There are fixed annuities, fixed/indexed annuities, variable annuities, hybrid annuities, income annuities, period income annuities, and possibly more. Insurance companies, and the insurance subsidiary wings of investment companies, have had many years to develop strategies and marketing ploys that help clients accumulate, protect, and distribute assets within various kinds of annuities. Variable annuities allow the annuitant to participate in the market through mutual funds — or, more accurately, “separate accounts” that mimic mutual funds. Continue reading...
Annuities are financial products developed and sold generally by insurance companies, and they are designed to protect an investor’s principle against the risks of market fluctuations and longevity (life expectancy). Annuities get their names from a series of payments which are based on an annualized payout rate. Annuities formerly just offered fixed payments for life, like a pension, and they were developed by life insurance companies who would use their mortality tables to determine the payout rates. Continue reading...
A foreign tax credit (or deduction) allows a citizen who earned income in another country to reduce the amount of domestic income taxes owed if the foreign government has already taxed the income abroad. Workers who earn income in a foreign country may be entitled to a credit or deduction on their domestic income taxes if they show that this income was already taxed by the foreign government where the income was earned. In the US, there are at least three types of foreign income tax exemptions, with a foreign tax credit being one of them. Continue reading...
Annuities are primarily designed to pay a substantially similar sum at regular intervals until the annuitant dies. Life insurance companies write these contracts since they are designed as a kind of longevity insurance. A lifetime income annuity, sometimes called a life annuity, is a stream of guaranteed payments for the duration of the annuitant’s life, based on the sum used to purchase the lifetime income and the age of the annuitant at the time of purchase. Life annuities can also be joint-life, meaning the contract will pay an amount to either of two people as long as one is alive. Continue reading...
Lump Sum distributions can allow you to invest according to your preferences, but could also be used frivolously and spent down in a short time. The first thing to keep in mind is that it’s very easy to spend a lump sum right away without thinking about the consequences. While the monthly payment option protects your money from overspending, many people feel that they would derive a greater value from having access to more of their money. Continue reading...
Accidental Death Benefits are paid only if the cause of death is deemed to be an accident. Sometimes a regular life insurance or health insurance contract will offer an Accidental Death rider. The rider is appended to the contract for a relatively inexpensive additional premium and will pay a specified death benefit if the insured’s cause of death results from an accident. There are several exclusions to the definition of accident, and usually these are things like dangerous activities (sky diving, cave diving), acts of violence and war, and accidents resulting from driving under the influence or other examples where the insured has willfully put themselves in danger, or committed a crime, will usually not be covered. Continue reading...
Income tax is paid to the government based on the amount of income earned. There are federal income taxes, and some states have their own income taxes, too. As an employee for a company, income taxes will be withheld from paychecks using the company’s best estimation of your annual earnings. At the end of the year it may turn out that they withheld too much, and the government may give you a tax refund for what was overpaid. Continue reading...
Parents and family members, or actually anyone, can contribute up to the annual gift tax exclusion limits, and beyond. Several people can fund 529 plans for the same person or child, and any one person can maintain as many 529 plans as they would like. Each person can contribute up to the annual gift tax exclusion amount, which in 2016 is $14,000, per beneficiary. 529 plans have a special provision that allows the owner of the account to exceed the gift tax exclusion by contributing up to $70,000 at once – but no contributions can be made for 5 years after that, because this provision is really just allowing you to accelerate the contributions. Continue reading...
The “Joint and Survivor” option on annuities generally provides an income guarantee for the owner and his/her spouse. This option can be applied to an IRA or qualified plan, even though that can only have one owner. Payments from an annuity, even if it is part of a qualified plan or IRA which can only technically have one owner, can be based on two annuitants. This will usually be a married couple, and it ensures that either spouse will receive payments from the annuity, even if one pre-deceases the other. Sometimes the survivorship payout is only a percentage of the original payout, such as 50% or 70%, but this is agreed upon by the annuitants at the time of application, and cannot be changed arbitrarily by the company or the annuitants. Continue reading...
Lifeline accounts are offered by some banks, and are required in some states to be offered by all banks — they give low-income individuals an opportunity to bank without paying fees or observing a minimum balance. This is done in an effort to promote social mobility by giving everyone access to banking services. You are likely to be able to find a bank that offers free checking accounts anyway, but some states have mandated that banks allow for so-called “lifeline accounts,” which have fewer features than other checking accounts but which may be the only banking option available for low-income banking customers. Continue reading...
SEP IRAs do not have to be established until taxes are filed for the year, and it can be done quickly. SEP IRAs require very little paperwork or trouble to establish. One form will notify the IRS that SEP contributions are being made for the year, and the amount. The only other documentation needed is a plan document, which establishes and outlines the eligibility rules for a particular plan, but this document only has to be kept on file at the business, and does not have to be submitted to the IRS or any regulatory authority. Continue reading...
Roth IRAs are not subject to RMDs, which means you aren’t forced to make withdrawals. In most retirement accounts, Required Minimum Distributions will be mandatory once the account holder turns 70 ½ years old. This does not apply to Roth IRAs. They are basically the only tax-advantaged retirement account that does not have to take RMDs. This is partially because the IRS wants to make sure they get some of the taxes out of the money that was invested on a pretax basis. Continue reading...
Life Income Funds (LIFs) are available to Canadians who have left a job before retirement and who are entitled to a sum of money in their pension plan. LIFs offer some flexibility, more than some other alternatives, but the amount that can be withdrawn at a time is limited to a minimum and maximum. The former employee could choose to leave the funds in the pension plan, or to use one of the alternatives to LIFs, which include a Locked-In Retirement Account (LIRA), which is provincially-regulated, or a Locked-In Retirement Savings Plan (LRSP), which is federally regulated. LIRAs and LRSPs do not permit regular withdrawals, and are seen as savings vehicles rather than income vehicles. Continue reading...
Earnings Before Interest, Taxes, and Depreciation (EBITD) is one method of viewing the earnings of a company with some of the typical expenses added back into it. It is not to be confused with its close cousin EBITDA, which also adds amortization back in. Amortization is essentially the same thing as depreciation, but amortization applies to intangibles such as debt principal amounts and intellectual property. Continue reading...
Alpha is a risk ratio which measures gains or losses relative to a benchmark, indicating whether an investor is being compensated with a return greater than the volatility risk being taken. Alpha’s counterpart, the Beta figure, measures how closely an investment follows movements in the market as a whole or, when examining mutual funds, how similarly the funds move to their relevant indexes. Alpha is expressed as integers, which can be translated into percentage points above or below a benchmark for a time period. Investors are interested in higher Alpha figures: the larger the positive Alpha, the more the fund in question has outperformed its benchmark. An Alpha of 2 indicates a performance 2% greater than its benchmark; inversely, a -2 Alpha would denote 2% underperformance. Continue reading...