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Couples retirement strategies, part three

Posted: December 8, 2008 9:02 p.m.
Updated: December 9, 2008 4:55 a.m.

Despite some recent reforms, federal and state taxes can still take a big bite out of inherited assets, including retirement plans, but there are some special circumstances.

For example, a surviving wife may roll the proceeds from her husband's 401(k) and IRA plans into her own tax-deferred IRA without realizing a current taxable event, thereby deferring having to take distributions until the year she turns 70 1/2.

Another consideration is whether a surviving spouse should stay in the house or sell it. Will there be enough income to afford the upkeep, such as insurance, repairs, maintenance, property taxes?

Fortunately, every couple qualifies for a one-time tax credit of up to $500,000 ($250,000 for a surviving spouse) from a sale of their primary residence, so your appreciation over the years can stay in your pocket rather than going to the government.

And, ownership of property should be balanced between a husband and wife so that each can be sure to take advantage of the maximum exclusion for estate taxes.

Couples should also consider a bypass trust, which is a way of passing assets to heirs that bypasses ownership of those assets to the surviving spouse.

This strategy specifies income payments from those assets to the surviving spouse, but creates less estate-tax liability at the death of the surviving spouse.

Be sure to consult your tax advisor to see if these and other strategies would be appropriate in your particular situation.

The result of a 1997 study conducted by Dreyfus and the National Center for Women and Retirement Research show that women investors are up to 50 percent more likely than their male counterparts to avoid making financial decisions out of fear of making a mistake, and 54 percent of them say that they have postponed making financial decisions because of the same fear.

One way over that hurdle is to retain a financial professional who can give you the advice you need.

Even if you end up alone, don't go at it alone.

Your overall well-being is as dependent on your financial well-being as it is on your health. Investing and sorting through the financial implications can be enormously complicated and the stakes couldn't be higher. This is especially true with the volatility Americans are experiencing with their retirement assets and plans at this time.

So, don't go at it alone.

Jim Lentini is president of Lentini Insurance & Investments, Inc., located in Santa Clarita. His column reflects his own views and not necessarily those of The Signal.


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