“Do I Pay Tax On My Social Security Benefits?”

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here
“Are My Social Security Benefits Taxed?”    
There’s good news and bad news….

     The good news:  If you don’t have any other income other than your Social Security, chances are you won’t pay much tax.

The bad news:  If you’re like MOST people
and you’re receiving other income other than just your Social Security, your Social Security benefits WILL be taxed..and in some cases up to 85%!!

Social Security Benefit Tax Rates    
To determine the percentage of your Social Security benefits that are taxable , calculate your “provisional income,” which is your adjusted gross  income (not counting Social Security benefits), plus any nontaxable
interest and half of your Social Security
benefits.

     If that total is less than $25,000 if you’re
single  or $32,000 if married filing jointly, your
Social Security benefits are not taxable. 

     If your provisional income is more than $34,000
on a single return or $44,000  on a joint return,
85% of your benefits may be taxable.

Social Security Taxes Are Different
An entirely different issue, and one that infuriates many people, is the amount of Social Security tax you pay on your regular income.

    The issue of course is

  “If I pay tax on  my income initially to fund my
Social Security, why should I pay tax on it again?“

     This is an entirely different tax and issue…more on this in a later newsletter.

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email :ironkop@gmailcomor if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.  
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com

2019 Qualified Retirement Plan Contribution Limits

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just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here

2019 Qualified Retirement Plan Contribution Limits
A ‘Qualified’ Retirement Plan is a plan==savings program just for retirement==money placed in grows tax deferred==special tax rules apply to each type  of qualified plan

2019 Qualified Plan Contribution Limits
The saying ‘there’s no free lunch ‘applies equally to Qualified Retirement Plans.

    While Uncle Sam allow your money to grow tax deferred, they at the same time place limits on the amount of money you can put into each type of Qualified Plan in any given year. 

      In 2019 here are the maximum amounts you can contribute per year per person in each type of Qualified Plan:

Traditional and Roth IRA
IRA:  $6,000 per person per year;
        $7,000 over 50
Roth IRA:  $6,000 per person per year;
                 $7,000 over 50

401k /403b/457 Plans401k/403b/457: 
$19,000 per person; age 50 catch up:  $6,000

   Employer match or profit sharing contributions
aren’t included in these limits. 401k and 403b
share the same limit.

    The 457 plan limit is separate.
You can contribute to both a 401k/403b plan
and a 457 plan.

Total Employer Contributions In
Defined Contribution Plans

Total Employer+ Employee Contribution:  $56,000

     The total employer plus employee contributions
to all defined contribution plans by the same
employer will increase by $1,000 from $55,000
in 2018 to $56,000 in 2019.

The age-50-or-over catch-up contribution is on top of this limit.

Income Limits  
Of course NOTHING from the government is easy.  There are income limits associated with each type of Qualified Plan.…something about there being ‘no free lunch!’

Reach Out To Me If You Have Questions.
   If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com

What Is A Will And Why Should You Have One

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here

Estate Plan Series:    
‘What Is A Will And Why Should You Have One’  
In previous newsletters I’ve shared that a proper Estate Plan has 5 components:  1. Last Will;
2. Power of Attorney For Healthcare; 3. Power of Attorney For Property and5. Revocable Living Trust.

   Today I’ll explain EXACTLY what a Willis and isn’t.

A Will Is A Roadmap Through The Probate
A ‘Last Will and Testament’ is a written declaration of how you wish your estate assets to be distributed.

    To start the estate distribution process, your heirs file your will with a Probate Court.
   Probate Court is the official, legal and binding court process that reviews your Will and declares that it is valid and that your assets may be distributed according to the provisions of the Will.

   A Will in effect, is the ‘roadmap’ a Probate Judge will use to determine how your estate will be distributed.

Heirs And Creditors Can Challenge
    Every possible heir gets a copy and notice of the Probate Court filing and has the opportunity to challenge any provision of the Will.
     Possible creditors (people you may owe money to) also get notice of the Probate filing through a required notice that gets posted in a local newspaper.  Any creditor who believes you owe them money can file a petition with the Probate court.
     As you can see, the entire Probate process can be quite lengthy and as a result can become enormously expensive if there are numerous challenges from heirs and creditors.

Objective Is To AVOID Probate With A Trust
    As a result of these possible delays and expense involved the planning objective is almost always to AVOID PROBATE.

   The simple and effective way to avoid Probate is to create A Revocable Living Trust and use it in conjunction with a ‘Pour Over Will. ‘

    A Trust is simply a legal entity that can own and distribute assets.  A Trust avoids probate  because:

==A Trust is a private document that    does NOT require filing.    All provisions made in a trust    remain absolutely private.

==Since there are no court filings    there are no delays and extensive    legal fees like those associated with    a Probate proceeding which is in essence  a trial if there are legal challenges.

 A ‘Pour Over Will’
     So if a Trust is the preferable way to transfer Estate assets why have a Will at all…?

    The problem with not having a will is if for some reason your heirs or creditors challenge or there is some other challenge that must be resolved in court.

     Without a Will, the Probate Judge will be required to apply the Law of ‘Intestate Succession’ ( the priority of persons who receive your assets ) with all the
delays and expense of Probate.As a result of this law,  your assets will be divided according to that
arbitrary law rather than by your wishes.

     So the solution is to create a special Will called a ‘Pour Over’ Will that states that your intention is that all your assets are distributed through your Revocable Living Trust and not the Will.

     As a result, if for some reason your estate is brought into court, a valid Pour Over Will must be upheld and honored by a Court and your Estate will be divided according to your Trust and not through Intestate Succession or by any heirs or creditors contrary desires.

   Stay tuned for upcoming installments of this Estate Plan Series where I’ll explain the components of a Trust in more detail. 

Reach Out To Me If You Have Questions.
   If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com

Business Owners: You Need To Do This One Thing…RIGHT NOW!!

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Just south of ‘Sawmill Creek…..

Hi Attorney Kevin Pritchett here

The Biggest Business Mistake You’re Probably Making      
One of the biggest mistakes you’re making right now with your business is…….

YOU HAVE NO SUCCESSION PLAN BUILT INTO YOUR OPERATING DOCUMENTS!!!

I’m right about that aren’t  I ???? 

      You’re so busy building and growing you pay no attention to how to pass the business  to the next generation.   Big problem…..easy solution!

Add Succession Language In Your Entity Documents   
Fortunately this is the kind of problem that has an easy solution…AS LONG AS YOU PAY ATTENTION AND ADDRESS IT!!

   Decide who you want to take over your business when you either quit, retire or die. Then make sure your Bylaws or Operating Agreement provide for whatever decision you make.

What Happens When You Become Disabled Or Die
   Further, make sure your documents state what happens to your business interests should YOU become disabled or die.  The last thing you want is for your business to be rudderless should you not be at the helm.

   If you want a family member to take over be sure to weave in language including your personal Estate Plan including Power of Attorney For Property and Revocable Living Trust.

 Be Sure To Provide For Succession Funding  
If your succession plan calls for a purchase of business interests by existing partners or employees, make sure there is a funding mechanism in place that will provide the cash required to complete the succession transaction.

   Structured correctly and purchased early enough, a cash value life insurance policy can be purchased by the company and used to pay for the purchase whether or not you die

Reach Out To Me If You Have Questions. 
If you have comments or questions about any of this…send me an email :ironkop@gmailcomor if reading on my blog or Facebook page leave your questions or comments below.

Remember…..”Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
www.KevinPLaw.com
ironkop@gmail.com
312-505-1957

“Kevin Can I Earn More Than 3.5%…”

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Just south of ‘Sawmill Creek…..

Hi Attorney Kevin Pritchett here

   “Kevin can I earn more than 3.5%…….?”

Yes and No
A client recently asked me this question…and like I told that client…yes…and no!!

   First..legal disclaimer.  I am NOT an investment advisor, securities representative nor do I play one on TV.  If you have questions about your securities (stocks, mutual funds, bonds…) you should seek the advice of licensed professionals.

   Ok…now that I have THAT out of the way….There are ways that are NOT securities that you have the possibility to earn a higher return.

    How?  The insurance industry!!

The Insurance Industry  
I bet you didn’t know that using insurance products, equity indexed annuities and equity indexed life insurance policies you have the ability to grow your money at returns approaching 5.5%-7.5% or higher…all without any stock market risk!!

Upside Return WITHOUT Downside Risk
      Here’s how it works.  When you purchase Equity Indexed Insurance Products you are NOT putting your money into the stock market.

   The insurance company takes your premium (the amount you are putting into the insurance products) and matches it against the return of various indexes. 

When the index you’re matched with goes up, you get a portion of the growth. 

Your Gains Are Locked In
    Here’s the good part…when the index you’re matched with goes down or negative…you get a ZERO return for that period.

  As a result, any gains you make arelocked in..you NEVER have to recover from a loss.

    So here’s all the benefits of this powerful strategy:
==you get upside market growth potential
==with NO RISK OF DOWNSIDE LOSS.

In other words….you get to participate in market gains…and avoid all market losses.PRETTY SWEET!!

Surrender Periods and Charges
     The catch with this strategy is that there are surrender periods and charges…just like with a CD.  You have access to 10% (typically) of your money each year without surrender charge and after the surrender period is over, the surrender charges NEVER reappear…unlike a Bank CD.

   If this approach interests you….

CLICK HERE TO WATCH AN EXPLANATION OF THIS STRATEGY

Another Approach -Guaranteed Fixed Interest Rate     So remember in my answer to my client’s question I said yes…and no…here’s the no part.

If you’re ‘old school’ and you want essentially a CD Replacement and want the certainty of a fixed interest rate for a fixed period of time…then you can choose a GUARANTEED FIXED INTEREST RATE Product like a Bank CD, or an annuity. A bond also if you want stock market exposure.  

Currently the going rate for Bank CDs is 0.5% to 1.5% depending on the term and the amount of the DC.

    Currently the going rate for Guaranteed Fixed Interest Rate annuity products is about 3.5% (this rate varies with market conditions and there is an outlier company with a 4.1% rate but 3.5% is about average for a Guaranteed Fixed Rate Annuity in March of 2019).

    So…if you want the absolute certainty of a certain interest rate..then no you can’t earn much more than 3.5% currently….

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email:ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq   
Law Office of Kevin Pritchett, Inc
www.KevinPLaw.com
312-505-1957
ironkop@gmail.com

The Shocking Truth About Your IRA…Its NOT What You Think It Is!!

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Just south of ‘Sawmill Creek…..

Hi Attorney Kevin Pritchett here
Do You Know What Your IRA/401k/403b REALLY Is?
   You probably believe what you’ve been told…that your Qualified Retirement Accounts are a great way for you to save for your retirement….yes and no.

    What you probably DON’T know (unless you’re my client already or attended one of my seminars)is :
“Your IRA/401k/403b (IRA for short)
is a way for the IRS to force you to pay them tax!!!

The Required Minimum Distribution (RMD)
Every retirement account grows money tax deferred.
If you withdraw IRA money before age 59 1/2 you must pay a stiff tax penalty PLUS any amount you take out is taxed as ordinary income.

    And when you reach age 70 1/2 there is a requirement called the REQUIRED MINIMUM DISTRIBUTION (RMD) which REQUIRES you to take money out of your IRA whether you need or want to or not!!

    This is where the IRS springs its TAX TRAP. As I’ve explained in previous newsletters…the IRS would MUCH rather get tax on the growth of your money…and they GUARANTEE THEMSELVES of a cut of your money by REQUIRING YOU TAKE THE MONEY OUT WHETHER YOU WANT TO OR NOT!!

There are proven strategies that can avoid
or at the least mitigate this tax trap…but only if you know them and apply them in time.

Reach Out To Me If You Have Questions.
If you have comments or questions about any of this…send me an email :ironkop@gmailcomor if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.312-505-1957ironkop@gmail.com
www.KevinPLaw.com

The 5 Steps To Creating An Estate Plan The ‘Right Way’

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Just south of ‘Sawmill Creek…..

Hi Attorney Kevin Pritchett here

Why You Need An  Estate Plan
So you know you need an estate plan….To die without handling your affairs creates CHAOS and expense for your loved ones.

   So even though you KNOW you need it for all the usual excuses you never seem to get around to it….NOW’S THE TIME!!

 There’s A TON Of Misinformation
       About Estate Planning      
The other problem is that there’s a TON of misinformation about what constitutes a proper Estate Plan (most of it from people like your ‘Uncle Melvin’ or ‘the guy down the block ‘who always seem to have advice to give…..

     So to cut through all the noise…here are the 5 steps to creating an estate plan:

The 5 Steps To Creating An Estate Plan
Step 1:Decide Your Final Wishes
      Before you do ANYTHING you MUST sit down and WRITE OUT what your final wishes are.I use a FINAL WISHES PLANNER for my clients…
   Then after you’ve decided on what you want you complete these 5 steps:

Step 2:  Create Powers of Attorney For Healthcare
             and Property  
Powers of Attorney are documents you create that allow others to act on your behalf…in this case to handle your Healthcare decisions and your business affairs.   
Powers of Attorney are ONLY effective when you are still alive.  Once you pass, other documents takeover.    In Illinois, a Power of Attorney For Healthcare is used instead of a ‘Living Will.’..they both do the same thing…state your Healthcare wishes in the event you cannot.

Step 3:  Create A ‘Pour Over’ Will
    This is where people ‘mess up.’ I will is just one instrument of your Estate Plan. A will is NOT an estate plan in and of itself nor does it  avoid probate.A will is in fact the guide a probate judge will use to distribute your estate. 

      You use a will basically to state that all your assets will be distributed by your Trust (more on Trusts in a moment).     

  If ALL you have is a will your heirs will
still have to go through the expense and delay of Probate

Step 4: Create A Revocable Living Trust  
Ideally you want your Trust to be the document
that distributes your estate assets…not your Will.

     Why?  Your Trust WILL NOT go through Probate, is private and does not have delays and expense of Probate Court.

      There are many types of Trusts but the one used in most simple Estate Plans is a Revocable Living Trust…which means you can change it any time in your life.

Step 5: Update Estate Plan Regularly
      Once you create your Estate Plan make sure you review it at least once every 3 year sor so.  Life changes and your Estate Plan must adapt accordingly.

Reach Out To Me If You Have Questions. .
If you have comments or questions about any of this…send me an email :ironkop@gmailcomor if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
‘Things don’t get better with neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
ironkop@gmail.com
312-505-1957
www.KevinPLaw.com

When Should You Take Your Social Security Benefit?

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At What Age Should You Take your Social Security Benefit?

Just south of ‘Sawmill Creek…..

Hi Attorney Kevin Pritchett here
When Is The Best Age To Take Social Security?
You can collect your Social Security benefit as early as age 62. 

  However, you only get the full 100% of your Social Security benefit when you wait until your Full Retirement Age, which is somewhere between  the ages of 66 and 67.

Full Retirement Agre (FRA)
    Quoting from a ‘Motley Fool’ article on the subject: 
 
   “ If you apply for your benefits at age 62, then your
monthly check will be much smaller than it would
be if you wait until FRA. The Social Security Administration reduces your monthly benefit payment by a fixed percentage for every month you claim earlier than FRA, and those monthly penalties can add up. For example, a person born in 1960 has a full retirement age of 67; if they claim benefits at age 62, they’d get 30% less per month than they would get otherwise.

From that same article….

“The difference between the amount you could collect
in benefits at age 62 and the amount you could collect
if you wait until age 70 to apply for benefits is significant.
Assuming a full retirement age of 67 and a full retirement
age benefit of $1,000, a person who claims at age 62
would only receive $700 per month, while a person who
claims at age 70 would receive $1,240 per month. In this
scenario, claiming at age 70 results in a monthly check
that’s a whopping 77% bigger than the check they’d
receive at age 62.”

Advantages of Collecting At Age 62 and Breakeven 
    The advantage of collecting at age 62 is that well…you can collect!!!  If you wait to collect and you die, then you lose!! Overall. there is a 40% chance a 60 year old will not live to age 80 based on 2015 data.
 
     Along these same lines…if you collect at age 62 the longer you live, the more total benefits you may collect…the point at which you ‘break even. “The breakeven point is different (with certain assumptions)for age 62, 67 and 70.

Other Factors
Of course since we’re dealing with ‘a government benefit…NOTHING IS SIMPLE!!!

   Other considerations:

==spousal benefits
==total income considerations
==what other income/assets you have

   If you’re nearing age 62 and expect to collect Social Security it pays to think very very carefully, consider all the possibilities and make a plan BEFORE you get to the critical age….you only get one shot at this!!!
Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
ironkop@gmail.com
www.KevinPLaw.com
312-505-1957

Do You Have A Lawsuit Target On Your Back?

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Are You A Target?

Just south of ‘Sawmill Creek…..

Hi Attorney Kevin Pritchett here

Your Chances of Being Sued
Americans have a 10 percent chance of being sued
in any given year and a 33 percent chance of being
sued in their lifetimes, according to IFG Trust Services Inc., an international investment firm

Common Mistake
Problem is there’s a LOT of misinformation about the best ways to protect yourself.

For example:
  Mistake
==you should put your investment real estate  in your personal Trust…WRONG. 

Correct Answer:         
Investment property should be in separate entities, Sub S corporations and Limited Liability Companies  Reason, if anything happens in your investment properties or your business, any resulting  liability will be ‘stopped’ at your entity….

      In other words, if your personal assets and your  business assets are all lumped together, any liability from your business or investment activity could be assigned to your personal assets…and as a result EVERYTHING YOU OWN COULD BE AT RISK…..not just the business asset where the event occurred.

A Trust is NOT An Asset Protection Instrument
     The other HUGE mistake I see people make is the belief that a Trust of ANY sort is an asset protection instrument….A TRUST DOES NOT PROVIDE ASSET PROTECTION…PERIOD!!!

    Trusts are estate planning and probate avoiding instruments.  THEY DO NOT PROTECT YOUR PERSONAL ASSETS FROM LAWSUITS…

   What You Need To Know About Asset Protection
  Entities (sub S corps, LLCs, C corps)  provide limited liability asset protection.  Meaning any liability you may incur while operating in one of these entities is ‘limited’ to your investment in that entity…and does not spill over into your personal assets that are outside of the entity.

Example
Say for example you owned investment real estate, an apartment building. And let’s say you also owned $500,000 in stocks and savings, jewelry, a personal home a vacation home, cars, a boat, expensive art and let’s say a valuable piece of land in another state.

Let’s also say there’s an accident in your apartment building and someone dies. Let’s assume your property insurance has reached its limit and after a long lawsuit there is a judgement against you for $1,000,000 over and above what your insurance covers.

If you owned that apartment building in your personal name ALL YOUR ASSETS listed above could be attached and at risk in that lawsuit.

On the other hand, if the apartment building was owned by an entity and operated correctly (there’s the trick and the subject for another article….) your liability would be LIMITED to what that entity owned…and not be extended to all your other personal assets…make sense?
Your investment activity should be operated in one of these entities.
   On the other hand….Trusts (Revocable, Irrevocable, Charitable Remainder et al )DO NOT PROVIDE ASSET PROTECTION and are for Estate Planning and Estate succession planning.

   Got it???  Good
If you have comments or questions post them below and I’ll be sure to answer them!!

Remember…..”Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
www.KevinPLaw.com
ironkop@gmail.com
312-505-1957
www.KevinPLaw.com