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Individual retirement account basics

A traditional Individual Retirement Account (IRA) is an account that has been funded by pretax dollars that are held by a custodian until you reach the age of retirement. With Baby boomers reaching that age, these accounts will become very important in determining when a person can retire and continue to have sufficient assets to live a comfortable life.  Until now,   many people never paid much attention to this account because they knew that they could not use the funds.  Setting aside the fact that these funds have greatly declined in value over the past two years, it is imperative that one understands how these accounts function and what check list should be used to insure that everything with the account is in order.

Structure of the account

This account is in your personal name. The funds are held by a custodian who is the plan administrator. This account has a named beneficiary designation.   Everyone should have a written copy of the beneficiary designation form for each account. Most married individuals have their spouse as the beneficiary. When I ask who the second beneficiary is or a contingent beneficiary they do not know. Be sure to have someone named and also be sure to have written proof of the named beneficiaries.  With all of the banks merging, going out of business and just changing names, your actual documentation can be lost in the shuffle. It is recommended that you contact the custodian of your IRA and ask for proof of beneficiaries.   Determine if your form is complete with a written primary beneficiary and a contingent beneficiary. 

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Assisted Living Deductibility

Can an individual deduct the cost of living in an assisted living facility (ALF)? This is controlled by Section 7702B of the Internal Revenue Code. 

Under the Internal Revenue Code, the cost of room and board is deductible under schedule A of your income tax return, if certain conditions are met. The cost is added to other health related expenses and must exceed seven and one half (7.5%) of your adjusted gross income to be deductible.  

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Second marriages: part two

This is the second part of a previous article relating to problems with second marriages and the transfer of assets at death. Here is a partial list of assets and the potential problems when titling is not updated.

No written agreement.

Most couples made a handshake and a kiss and promise to see that the other’s children would get everything that belongs to them.  They are probably telling the truth but they have no idea of the results that can occur without planning. The following is a partial list of the titling of assets and the adverse results without proper planning.

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