A new era of the Rockford City Council began on Election Day, November 6. Tamara Bergstrom and Ed Ross were elected and began serving the residents on Monday, the 12th. I have served with Tammy on City Council and know Ed from various City functions and expect good things and good ideas to come from both of them. We knew quite quickly after the polls closed who the top two vote getters were. It was a close race between Ed and third place, Jeff Lewis, but there were no calls for a re-count. Again, I want to thank Jeff, Jeff Lipe and Ken Phillips for running and making that effort. Chris Bedford, our City Clerk, runs a very efficient operation and heads a great team. The votes were all counted and verified not too long after the polls closed. This is in comparison to a couple of areas in the USA, mainly southern Florida, where they were still counting votes at noon on Tuesday, the 13th. Perhaps it is time to have an early voting or extended voting period. What about 7 or 14 or 21 or even 30 days? Almost 100% of the population should be able to make it to a designated polling place with an extended time frame. In today’s technological environment, you would think there would be no trouble getting the votes counted. However, there is a lot of pressure on the people in Chris’ position to verify the person voting is the person who is registered to vote. My understanding is that, in Florida, verifying signatures with the voter registration rolls can be a problem. I have to admit that my signature can get a little sloppy sometimes but my excuse for that is I write left handed. If God had wanted everyone to read my signature, He would have made me right-handed. When I go to City Hall in person, they look at my signature on the form and my drivers license; verify they are both the same level of sloppiness and give me the okay to vote. No trying to figure it out later, thereby slowing down the counting process. I think it’s time to spread out the voting, even if that takes 30 days, so that we can know where the chips have fallen before the opening day of the Michigan gun deer season. For the non-hunters in the audience, that would be November 15.
This week, I would like to make a few points about what happens when an owner of an Individual Retirement Account dies and either hasn’t declared a beneficiary or has specifically listed a trust, a charity or the estate as the beneficiary. There are special rules that come into play when a non-person is listed as the beneficiary. First, as is always the case, the entire amount can be withdrawn immediately. That full amount would be included on the tax return of the estate or trust. Second, if the owner dies before reaching age 70 ½ and has not yet began receiving Required Minimum Distributions, the beneficiary must take the entire balance in the account by the end of the 5th year following the year of death. The beneficiary can spread out the distributions in any amount in any of the five years; including taking the entire distribution on the final day. The only certain fact is that all of the money must be distributed by the end of that 5th year. Third, if the owner dies after reaching the age of 70 ½ and had began taking RMDs, the distributions must be taken based on Table I, the Single Lifetime Table, using the owner’s age in the year of death. In the second and each following year, reduce the lifetime expectancy by 1. For example, the owner is age 75 in the year of death. The life expectancy for a 75 year old is 13.4 years. The beneficiary must take out 1/13.4 in the year of death. In the 2nd year, the distribution would be 1/12.4 and 1/11.4 for the third year and so on. Fourth, there are some nuances in this non-spouse, non-person beneficiary arena. If there is no beneficiary named, the estate, by default, becomes the beneficiary. However, the estate has the authority to name a person beneficiary of the estate as the designated beneficiary for the IRA distributions. The deadline for making a designated beneficiary choice is September 30 of the year following the year of the IRA owner’s death. Since the estate tax top rate is extremely high, 39.6%, and starts at income of $12,501, in most instances, it pays to designate a person as a beneficiary. Our individual tax rates are much lower. A single person wouldn’t start paying the 39.6% tax rate until total income reaches $418,401. Having the estate take the distributions may very well not be the best decision. I hope this series of articles on IRA distributions has been helpful. This is Jerry Coon signing off.
Jerry Coon is an Enrolled Agent.
He owns Action Tax Service on Northland Dr in Rockford.
Contact Jerry at www.actiontaxservice.com