New Tax Bill Requires Updated Planning Approach

July 21, 2025 — Sam H. Fawaz

President Trump signed into law the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, after months of deliberation in the House and Senate. The legislation includes multiple tax provisions that will guide individuals, business owners, and investors in planning their finances for many years to come.

The OBBBA makes permanent most of the 2017 Tax Cuts and Jobs Act (TCJA) tax provisions that were set to expire at the end of this year, while delivering several new deductions and changes.

Many of the new and modified provisions seem simple on the surface, but will require new approaches to tax planning to optimize the benefits of various tax breaks.

On behalf of all CPA’s and accountants, and before delving into the various provisions below, I want to thank Congress for renewing the “CPA Full Employment Act,” also known as GOFA (Guaranteed Overtime for Accountants), proving once again that while tax breaks may expire, job security for tax professionals is eternal.

TCJA Expiring provisions that are now permanent

Rates and structure

The TCJA reduced the applicable tax rates for most brackets from 2018 through 2025, while increasing the income range covered by each bracket. The new legislation makes the TCJA rates and structure permanent. Individual marginal income tax brackets will remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Standard deduction amounts

The TCJA established larger standard deduction amounts. The OBBBA includes an additional increase, and for 2025, the standard deduction amounts are:

  • $31,500 for married filing jointly
  • $23,625 for head of household
  • $15,750 for single and married filing separately

Personal exemptions

The TCJA eliminated the deduction for personal exemptions. The last year it was available was 2017 at $4,050 per exemption. This deduction is now permanently eliminated.

Child tax credit

Prior temporary increases to the child tax credit, the refundable portion of the credit, and income phase-out ranges are made permanent. The OBBBA increases the child tax credit to $2,200 for each qualifying child starting in 2025.

Mortgage interest deduction

The TCJA imposed a limit of $750,000 ($375,000 for married filing separately) on qualifying mortgage debt for purposes of the mortgage interest deduction. It also made interest on home equity indebtedness nondeductible. Both provisions are now permanent.

The OBBBA reinstates the previously expired provision allowing for the deduction of mortgage insurance premiums as interest (subject to income limitations), beginning in 2026.

Estate and gift tax exemption

The TCJA implemented a larger estate and gift tax exemption amount (essentially doubled it). The OBBBA increases it to $15 million in 2026 ($30 million for married couples), and it will be indexed for inflation in subsequent years.

Alternative minimum tax (AMT)

The TCJA implemented significantly increased AMT exemption amounts and exemption income phase-out thresholds. The OBBBA makes them permanent.

Itemized deduction limit

The OBBBA replaces the previously suspended (from 2018 to 2025) overall limit on itemized deductions. This was known as the “Pease limitation.”

For taxpayers with adjusted gross income (AGI) above a specified threshold (for example, in 2017, $254,200 for single filers and $305,050 for married filing jointly), the Pease limitation reduced total itemized deductions by 3% of the amount by which AGI exceeded the threshold. The haircut could not exceed 80% of the total itemized deductions.

The Pease limitation is now replaced with a percentage reduction that applies to individuals in the highest tax bracket (37%), effectively capping the value of each $1.00 of itemized deductions at $0.35.

Most taxpayers will find the new limitation more generous, as the cap only affects the highest earners.

Qualified business income deduction (Section 199A)

The TCJA created the deduction for qualified business income. The OBBBA additionally increases the phase-in thresholds for the deduction limit. A new minimum deduction of $400 is now available for specific individuals with at least $1,000 in qualified business income.

TCJA Existing provisions with material changes

The One Big Beautiful Bill Act also makes significant changes to other provisions, some of which are temporary, while others are permanent. Two of the changes that received substantial coverage leading up to passage and enactment include a temporary increase in the limit on allowable state and local tax deductions and the rollback of existing energy tax incentives.

State and local tax deduction (SALT)

The new legislation temporarily increases the cap on the SALT deduction from $10,000 to $40,000 through 2029. This increased cap is retroactively effective for the entire year 2025. The $40,000 cap will increase to $40,400 in 2026 and by 1% for each of the following three years.

The cap is reduced for those with modified adjusted gross incomes (AGI) exceeding $500,000 (tax year 2025, adjusted for inflation in subsequent years), but the limit is never reduced below $10,000. In 2030, the SALT deduction cap will return to $10,000.

Careful income and deduction planning for taxpayers around the $500,000 AGI level will be critical going forward.

Repeal and phase-out of clean energy credits

The new legislation significantly rolls back energy-related tax incentives. Provisions include:

  • The Clean Vehicle Credit (Internal Revenue Code or IRC Section 30D), the Previously Owned Clean Vehicle Credit (IRC Section 25E), and the Qualified Commercial Clean Vehicles Credit (IRC Section 45W) are eliminated effective for vehicles acquired after September 30, 2025.
  • The Energy Efficient Home Improvement Credit (IRC Section 25C) and the Residential Clean Energy Credit (IRC Section 25D) are repealed for property placed in service after December 31, 2025.
  • The New Energy Efficient Home Credit (Section 45L) will expire on June 30, 2026; the credit cannot be claimed for homes acquired after that date.
  • The Alternative Fuel Vehicle Refueling Property Credit (IRC Section 30C) will not be available for property placed in service after June 30, 2026.

Gambling losses

The new law changes the treatment of gambling losses, effective as of 2026.

Before the legislation, individuals could deduct 100% of their gambling losses against winnings (the deduction could never exceed the amount of gambling winnings). Now, a new cap limits deductions to 90%.

Bonus depreciation and Section 179 expensing

Before this legislation, the additional first-year “bonus” depreciation was being phased out, with the maximum deduction dropping to 40% by 2025.

The new legislation permanently establishes a 100% additional first-year depreciation deduction for qualifying property, allowing businesses to deduct the full cost of such property in the year of acquisition. The 100% additional first-year depreciation deduction is available for property acquired after January 19, 2025.

Effective for property placed in service in 2025, the legislation also increases the limit for expensing under IRC Section 179 from $1 million of acquisitions (indexed for inflation) to $2.5 million, and it increases the phase-out threshold from $2.5 million (indexed for inflation) to $4 million.

OBBBA New provisions

The One Big Beautiful Bill Act includes several new tax deductions intended to represent a step toward fulfilling campaign promises that eliminate taxes on Social Security, tips, and overtime. Some of these new deductions are temporary, others are permanent.

Deduction for seniors

Effective for tax years 2025–2028, the legislation creates a new $6,000 deduction for qualifying individuals who reach the age of 65 during the year. The deduction begins to phase out when modified adjusted gross income exceeds $75,000 ($150,000 for married filing jointly).

Tip income deduction, AKA “no tax on tips”

Effective for tax years 2025–2028, for the first time, tip-based workers can deduct a portion of their cash tips for federal income tax purposes. Individuals who receive qualified cash tips in occupations that customarily received tips before January 1, 2025, may exclude up to $25,000 in reported tip income from their federal taxable income. A married couple filing a joint return may each claim a deduction of up to $25,000.

The deduction phases out at a modified adjusted gross income of $150,000 for single filers and $300,000 for joint filers. This provision applies to a broad range of service occupations, including restaurant staff, hairstylists, and hospitality workers.

Overtime deduction, AKA “no tax on overtime”

A new temporary deduction of up to $12,500 ($25,000 if married filing jointly) is established for qualified overtime compensation. The deduction is phased out for individuals with a modified adjusted gross income of over $150,000 ($300,000 if married filing jointly).

The deduction is reduced by $100 for each $1,000 of modified adjusted gross income exceeding the threshold. To claim the deduction, a Social Security number must be provided. The deduction is available for tax years 2025 through 2028.

Investment accounts for children, AKA “Trump accounts”

A new tax-deferred account for children under the age of 18 is created, effective January 1, 2026. With limited exceptions, up to $5,000 in total can be contributed to an account annually (the $5,000 amount is indexed for inflation). Parents, relatives, employers, and certain tax-exempt, nonprofit, and government organizations are eligible to make contributions. Contributions are not tax-deductible.

For children born between 2025 and 2028, the federal government will contribute $1,000 per child into eligible accounts. Distributions generally cannot be made from the account before the account holder reaches the age of 18, and there are restrictions, limitations, and tax consequences that govern how and when account funds can be used. To have an account, a child must be a U.S. citizen and have a Social Security number.

Charitable deduction for non-itemizers and itemizers

The legislation reinstates a tax provision that was previously effective for tax year 2021.

A deduction for qualifying charitable contributions is now permanently established for individuals who do not itemize deductions. The deduction is capped at $1,000 ($2,000 for married filing jointly). Contributions must be made in cash to a public charity and meet other specific requirements. This deduction is available starting in tax year 2026.

For itemizers, the legislation introduces a “haircut” to charitable contributions, equivalent to 0.5% of adjusted gross income, similar to the 7.5% haircut for medical expenses.

These provisions possibly make donor-advised funds and qualified charitable distributions (from IRAs for those age 70.5 or older) more critical than ever to incorporate into charitable giving strategies and planning.

Car loan interest deduction, AKA “no tax on car loan interest”

For tax years 2025–2028, interest paid on car loans is now deductible for certain buyers.

Beginning in 2025, taxpayers who purchase qualifying new vehicles assembled in the United States for personal use may deduct up to $10,000 in annual interest on a qualifying loan.

The deduction is phased out at higher incomes, starting at a modified adjusted gross income of $100,000 (single filers) or $200,000 (joint filers).

529 Education Savings Plans

Section 529 college savings accounts are expanded in three critical ways:

First, you can withdraw up to $20,000 per year tax-free for K-12 schooling beginning in 2026, an increase of $10,000 from the current annual cap. As always, there is no limit on the amount of tax-free withdrawals that can be used to pay for college.

Second, more K-12 expenses are covered. It used to be that distributions for K-12 education were tax-free only if used to cover tuition. Now covered are costs of tuition, materials for curricula and online studying, books, educational tutoring, fees for taking an advanced placement test or any exam related to college admission, and educational therapies provided by a licensed provider to students with disabilities. This easing begins with distributions from 529 accounts made after July 4, 2025.

Third, certain post-high school credentialing program costs are eligible for payment via 529 plans. This expansion supports individuals pursuing alternative educational and career pathways outside of traditional degree programs. Eligible costs typically include:

  • Tuition, books, and required fees for credentialing and licensing programs.
  • Testing fees to obtain or maintain a professional certification or license.
  • Continuing education costs needed to renew or maintain specific credentials.
  • Supplies and equipment required for a recognized credentialing program.

1099 Reporting

A 2021 law required third-party settlement networks to send 1099-Ks to payees who were paid more than $600 for goods and services. The OBBBA repeals this change and restores the prior reporting rule. Third-party networks are now required to send 1099-Ks only to payees with over 200 transactions who were paid more than $20,000 in a calendar year.

The filing threshold for 1099-MISC and 1099-NEC forms increases from $600 to $2,000, effective with forms sent out in 2027 for tax year 2026. This figure will be indexed for inflation. The $600 reporting threshold has not changed since 1954, even though prices have increased by about 1095% since then.

But wait….there’s more …

The One Big Beautiful Bill Act includes broad and sweeping changes that will have a profound impact on tax planning. The legislation is over 800 pages long, and we have only scratched the surface here.

While income and estate tax provisions are highlighted in this summary, the legislation also makes fundamental changes that impact areas such as healthcare, immigration, and border security, as well as additional tax changes. Further information and details will be forthcoming in the coming weeks and months. There are numerous unanswered questions that will be addressed through Congressional technical corrections, IRS Bulletins, and upcoming regulations.

As always, if you have questions about how these changes affect your specific situation, please don’t hesitate to contact us. Although I expect a jump in my overtime this year as a result of this tax bill, the no-tax-on-overtime provision does not apply to yours truly. I guess that’s the price to pay for having a job for life.

Sam H. Fawaz is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other tax or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.

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Does the new Social Security ID Verification Affect You?

June 25, 2025 — Sam H. Fawaz

This spring, the Social Security Administration (SSA) announced that some individuals who want to claim Social Security benefits or change their direct deposit account information will need to prove their identity in person at a local Social Security field office.

According to the SSA, stronger identity verification procedures are needed to prevent fraud. The new rule is already confusing, partly because of its hasty rollout, so here are answers to some common questions and links to official SSA information.

Who will need to visit a Social Security office to verify their identity?

This new rule only affects people without or who can’t use their personal mySocialSecurity account. If you already have a mySocialSecurity account, you can continue to file new benefit claims, set up direct deposit, or make direct deposit changes online — you will not need to visit an office.

You must visit an office to verify your identity if you do not have a mySocialSecurity account and you are:

· Applying for retirement, survivor, spousal, or dependent child benefits

· Changing direct deposit information for any type of benefit

· Receiving benefit payments by paper check and need to change your mailing address

You don’t need to visit an office to verify your identity if you are applying for Medicare, Social Security disability benefits, or Supplemental Security Income (SSI) benefits — these are exempt from the new rule, and you can complete the process by phone.

If you’re already receiving benefits and don’t need to change direct deposit information, you will not have to contact the SSA online or in person to verify your identity. According to the SSA, “People will continue to receive their benefits and on time to the bank account information in Social Security’s records without needing to prove their identity.” There’s also no need to visit an office to verify your identity if you are not yet receiving benefits.

The SSA has also announced that requests for direct deposit changes (online or in person) will be processed within one business day. Before this, online direct deposit changes were held for 30 days.

What if you don’t have a mySocialSecurity account?

You can create an account anytime on the SSA website, ssa.gov/myaccount. A mySocialSecurity account is free and gives you access to SSA tools and services online. For example, you can request a replacement Social Security card, view your Social Security statement that includes your earnings record and future benefit estimates, apply for new benefits and set up direct deposit, or manage your current benefits and change your direct deposit instructions.

To start the sign-up process, you will be prompted to create an account with one of two credential service providers, Login.gov or ID.me. These services meet the U.S. government’s identity proofing and authentication requirements and help the SSA securely verify your identity online, so you won’t need to prove your identity at an SSA office. You can also use your existing Login.gov or ID.me credentials if you have already signed up with one of these providers elsewhere.

If you’re unable or unwilling to create a mySocialSecurity account, you can call the SSA and start a benefits claim; however, if you’re filing an application for retirement, survivor, spousal, or dependent child benefits, your request can’t be completed until your identity is verified in person. You may also start a direct deposit change by phone and subsequently visit an office to complete the identity verification step. You can find your local SSA office using the Social Security Office Locator at ssa.gov.

To complete your transaction in one step, the SSA recommends scheduling an in-person appointment by calling the SSA at (800) 772-1213. However, you may face delays. According to SSA data (through February), only 44% of benefit claim appointments are scheduled within 28 days, and the average time you’ll wait on hold to speak to a representative (in English) is 1 hour and 28 minutes, though you can request a callback (74% of callers do). These wait times will vary, but are likely to worsen as the influx of calls increases and the SSA experiences staffing cuts.

What if your Social Security account was created before September 18, 2021?

Last July, the SSA announced that anyone who created a mySocialSecurity account with a username and password before September 18, 2021, would need to begin using either Login.gov or ID.me to continue accessing their Social Security account. If you haven’t already completed the transition, you can find instructions at ssa.gov/myaccount.

How can you help protect yourself against Social Security scams?

Scammers may take advantage of confusion over this new rule by posing as SSA representatives and asking individuals to verify their identity to continue receiving benefits. Be extremely careful if you receive an unsolicited call, text, email, or social media message claiming to be from the SSA or the Office of the Inspector General.

Although SSA representatives may occasionally contact beneficiaries by phone for legitimate business purposes, they will never contact you via text message or social media. Representatives will never threaten you, pressure you to take immediate action (including sharing personal information), ask you to send money, or say they need to suspend your Social Security number. Familiarize yourself with the signs of a Social Security-related scam by visiting ssa.gov/scam.

Sam H. Fawaz is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other tax or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client and their financial plan and investment objectives are different.

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Hidden Risks of Naming a Trust as Your IRA or 401(k) Beneficiary

May 4, 2025 — Sam H. Fawaz

EXECUTIVE SUMMARY

Naming your trust as the beneficiary of your IRA or 401(k) can be a powerful estate planning tool, but it comes with significant complexities and trade-offs.

Recent IRS regulations, particularly the final regulations issued in July 2024, have made several significant changes affecting individuals who have named a trust as the beneficiary of their IRA or 401(k). These changes address required minimum distributions (RMDs), beneficiary classifications, documentation requirements, and tax implications.

If you have a trust, it may no longer be prudent to name your trust as your 401(k) or IRA beneficiary. You may need to consult with your estate planning attorney to confirm that naming your trust as the beneficiary is still a valid designation.

If your trust document is over five years old, you may need to consult your estate planning attorney to modify your trust or update your beneficiary designations to avoid unintended accelerated distribution timeframes or subject the distributions to steep trust tax rates.

Before discussing the latest tax regulations and the implications of naming a trust as your IRA or 401(k) beneficiary, let’s look at the pros and cons of doing so:

PROS OF NAMING A TRUST AS AN IRA BENEFICIARY

• Control Over Distributions: A trust allows you to set specific terms for how and when assets are distributed. This is particularly useful if your beneficiaries are minors, have special needs, or may not be financially responsible [9][10][11][12].

• Protection for Vulnerable Beneficiaries: Trusts can protect beneficiaries who are minors, disabled, or have issues with creditors, addiction, or poor financial decision-making [9][13][14][11][12].

• Asset Protection: A trust can safeguard assets from a beneficiary’s creditors, divorce, or lawsuits [10][12].

• Estate Planning for Blended Families: Trusts can ensure assets are distributed according to your wishes, such as providing for a spouse during their lifetime with the remainder going to children from a previous marriage [13][14][10][12].

• Privacy: Distributions through a trust avoid probate, keeping your estate details private [10].

• Special Needs Planning: A properly structured trust can provide for a beneficiary with special needs without disqualifying them from government benefits [14][10][11].

• Contingency Planning: Trusts can specify what happens if a beneficiary dies before receiving their full share, offering more control over the ultimate disposition of assets [12].

CONS OF NAMING A TRUST AS AN IRA BENEFICIARY

• Accelerated Taxation and RMD Rules: Trusts are subject to RMDs based on the oldest beneficiary’s life expectancy, which can accelerate withdrawals and taxes compared to naming individuals directly [9][13][11].

Under the SECURE Act, most non-spouse beneficiaries, including trusts, must withdraw the entire account within 10 years, eliminating the “stretch IRA” (explained below) in most cases [14][10][11].

• Potential for Higher Taxes: Trusts reach the highest federal income tax rate much faster than individuals. If the trust accumulates income instead of distributing it, this can result in significantly higher taxes [15][10].

• Loss of Spousal Rollover: Naming a trust as beneficiary means a surviving spouse cannot roll the account into their own IRA, losing the ability to defer taxes over their lifetime [14].

• Increased Complexity and Cost: Administering a trust as a retirement account beneficiary involves more paperwork, legal compliance, and potentially higher administrative costs [13][15][10].

• Risk of Non-Compliance: If the trust is not drafted correctly as a “see-through” (or “look-through”) trust (see below), it may trigger even more accelerated distribution rules, such as the five-year distribution rule [15][11].

• Plan Restrictions: Some employer plans may not allow trusts as beneficiaries or may require lump-sum distributions, which could trigger full immediate taxation [13].

• No Probate Avoidance for Trust Assets: While retirement accounts avoid probate when a beneficiary is named, naming a trust does not provide additional probate avoidance for the retirement account, though it does for assets distributed from the trust [11].

When Naming a Trust as Beneficiary Makes Sense

• You have minor, disabled, or financially irresponsible beneficiaries.

• You want to control the timing and amount of distributions.

• You need to protect assets from creditors or divorce.

• You have a blended family and want to ensure specific inheritance outcomes.

• You have a beneficiary who relies on government benefits.

When It May Not Be Advantageous

• Your beneficiaries are financially responsible adults.

• You want to maximize tax deferral and minimize complexity.

• Your spouse is the primary beneficiary and would benefit from rollover options.

KEY TAX CHANGES AND THEIR EFFECTS

Before the SECURE Act, passed in December 2019, IRA beneficiaries enjoyed a long “stretch” of time to take distributions from the IRAs they inherited. Beneficiaries could distribute the inherited IRA assets over the remainder of their lifetimes using the IRS RMD rules.

That stretch was largely eliminated for most IRA beneficiaries who inherited an IRA from a decedent starting in 2020. The IRS took over 4 1/2 years from the passage of the SECURE Act to finalize regulations surrounding distributions from post-2019 inherited IRAs.

1. Required Minimum Distributions (RMDs) and the 10-Year Rule

As mentioned above, the SECURE Act and its subsequent regulations essentially eliminated the “stretch IRA” for most non-spouse beneficiaries, including trusts, replacing it with a 10-year payout rule. This means that, in most cases, all funds in an inherited IRA or 401(k) must be distributed by the end of the 10th year following the account holder’s death.

If the account owner died after their required beginning date (RBD), annual RMDs must be taken during years 1–9, with the entire balance distributed by year 10.

If the account owner died before their required beginning date (RBD), annual required minimum distributions (RMDs) are not required in years 1–9. Instead, the entire inherited IRA or retirement account balance must be distributed by the end of the 10th year following the year of the original owner’s death. Depending on the size of the IRA and the beneficiary’s tax bracket, taking some distributions in years 1-9 may be prudent, even if not required.

The RBD for most IRA owners is age 70-1/2 to 73 (soon to be 75). Remember that the “M” in RMD is the minimum you must distribute. Depending on the size of the IRA, more than the minimum distribution will often make more sense.

Only “Eligible Designated Beneficiaries” (EDBs), such as spouses, minor children (until age 21), disabled or chronically ill individuals, or beneficiaries less than 10 years younger than the decedent, can still use the stretch distribution based on their life expectancy.

2. Trust Types and Beneficiary Analysis

The IRS continues to recognize “see-through” (or “look-through”) trusts, which allow the trust’s individual beneficiaries to be treated as the IRA’s beneficiaries for RMD purposes.

To qualify as a see-through trust under IRS rules, the trust must meet specific criteria that allow its beneficiaries to be treated as direct beneficiaries of an inherited IRA or 401(k). These requirements ensure the trust can utilize stretch distributions or the 10-year rule based on beneficiary status (i.e., EDB or non-EDB).

Here are the key requirements of a see-through trust:

a. Validity Under State Law

The trust must be legally valid in the state where it was created. This typically requires proper execution, witnessing, and notarization of the trust document.

b. Irrevocability Upon Death

The trust must be irrevocable from inception or upon the account owner’s death. Revocable trusts that convert to irrevocable status at death are acceptable.

c. Identifiable Beneficiaries

All trust beneficiaries must be clearly named, identifiable, and eligible individuals (e.g., people, not charities or other entities). This ensures the IRS can “see through” the trust to determine distribution timelines based on beneficiary life expectancies or the 10-year rule.

If a trust is not a see-through trust, it may be considered a:

  1. Conduit Trust: All IRA distributions must be immediately passed to beneficiaries. Taxes are paid at the beneficiaries’ individual rates, but the 10-year rule generally applies unless all beneficiaries are EDBs.

OR

  1. Accumulation (Discretionary) Trust: Distributions are retained in the trust, which pays taxes at higher trust tax rates. All trust beneficiaries are considered when determining the payout period, and the 10-year rule usually applies.

The Final Regulations allow trusts that split into separate subtrusts for each beneficiary upon the account holder’s death to apply RMD rules based on each subtrust’s beneficiary status. This can preserve stretch treatment for EDBs even if other beneficiaries are subject to the 10-year rule.

3. Documentation Requirements

For IRAs, the IRS has eliminated the requirement for trustees to provide detailed trust documentation to the IRA custodian. Now, only a list of trust beneficiaries and their entitlements may be required, greatly simplifying compliance for see-through trusts.

Some documentation requirements remain for 401(k) and other employer plans, but they have been simplified.

4. Tax Consequences

As mentioned above, trusts reach the top income tax bracket much faster than individuals. In 2024, trust income over $15,200 is taxed at 37%, whereas individuals do not hit this rate until much higher income levels. This can result in significantly higher tax bills if IRA distributions are accumulated in a trust rather than paid to beneficiaries.

Lump-sum distributions or failing to comply with the new rules can result in accelerated taxation and potential penalties.

5. Special Provisions and Clarifications

The IRS clarified that if a trust divides into separate subtrusts immediately upon the account owner’s death, each subtrust is analyzed separately for RMD purposes.

If trust terms or beneficiaries are modified after the account owner’s death (by September 30 of the following year), these changes will affect RMD calculations as if they were always part of the original trust.

Payments made “for the benefit of” a beneficiary (such as to a custodial account for a minor) are treated as direct payments to the beneficiary for RMD purposes.

PRACTICAL CONSIDERATIONS

Most trusts named as IRA or 401(k) beneficiaries will now face the 10-year payout rule, with fewer opportunities for long-term tax deferral.

Under the new rules, trusts must be carefully analyzed and possibly restructured to maximize tax efficiency and achieve estate planning goals.

Simplifying documentation requirements reduces administrative burdens for IRA trusts, but not necessarily for employer plans.

High trust tax rates make accumulation trusts less attractive for holding retirement assets over the long term.

ACTION MAY BE REQUIRED

If your IRA or 401(k) names your trust as a beneficiary, it’s advisable to consult with your estate planning attorney to ensure that, in light of the recent tax regulations, naming the Trust as beneficiary is still prudent.

If you’re unsure whether your trust is considered a see-through trust, consult with your estate planning attorney to determine if the trust must be modified to ensure that the 10-year distribution for beneficiaries remains intact. Otherwise, that 10-year period might be inadvertently shortened to five years, or worse, subject distributions to overly steep trust tax rates.

Whether you have a trust or have named your trust as a beneficiary of your IRA or 401(k), now is a good time to check the beneficiary designations on all of your retirement accounts and insurance policies to ensure they are up to date and reflect all of your recent life changes. If something should happen to you, your loved ones will be most grateful.

Sam H. Fawaz is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other tax or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client and their financial plan and investment objectives are different.

1-8. Deleted

9. https://www.voya.com/blog/retirement-account-pros-and-cons-naming-trust-beneficiary

10. https://www.markruizlaw.com/should-your-living-trust-be-the-beneficiary-of-your-ira-or-401-k-pros-and-cons-explained

11. https://www.investopedia.com/ask/answers/09/trust-beneficiaries.asp

12. https://www.drobnylaw.com/articles/designating-a-trust-as-beneficiary-of-individual-retirement-account-benefits

13. https://www.myubiquity.com/resources/can-a-trust-be-a-beneficiary-of-a-401-k-plan

14. https://www.katz-law-firm.com/can-a-trust-be-the-beneficiary-of-an-ira/

15. https://caryestateplanning.com/blog/should-i-have-a-trust-as-my-ira-beneficiary/

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An Estate Plan for your Digital Assets

April 2, 2016 — Sam H. Fawaz

In recent years, a new category of assets has appeared on the scene, which can be more complicated to pass on at someone’s death than stocks, bonds and cash.  The list includes such valuable property as digital domain names, social media accounts, websites and blogs that you manage, and pretty much anything stored in the digital “cloud.”  In addition, if you were to die tomorrow, would your heirs know the pass-codes to access your iPad or smartphone?  Or, for that matter, your e-mail account or the Amazon.com or iTunes shopping accounts you’ve set up?  Would they know how to shut down your Facebook account, or would it live on after your death?

A service called Everplans has created a listing of these and other digital assets that you might consider in your estate plan, and recommends that you share your logins and passwords with a digital executor or heirs.  If the account or asset has value (airline miles or hotel rewards programs, domain names) these should be transferred to specific heirs—and you can include these bequests in your will.  Other assets should probably be shut down or discontinued, which means your digital executor should probably be a detail-oriented person with some technical familiarity.

The site also provides a guide to how to shut down accounts; click on “F,” select “Facebook,” and you’re taken to a site (https://www.everplans.com/articles/how-to-close-a-facebook-account-when-someone-dies) which tells you how to deactivate or delete the account.  Note that each option requires the digital executor to be able to log into the site first; otherwise that person would have to submit your birth and death certificates and proof of authority under local law that he/she is your lawful representative.  (The executor can also “memorialize” your account, which means freezing it from outside participation.)

The point here is that even if you know who would get your house and retirement assets if you were hit by a bus tomorrow, you could still be leaving a mess to your heirs unless you clean up your digital assets as well.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch.

Sources:

https://www.everplans.com/articles/a-helpful-overview-of-all-your-digital-property-and-digital-assets

The MoneyGeek thanks guest writer Bob Veres for his contribution to this post

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It’s 2015: Do You Know Who Your Beneficiaries Are?

June 7, 2015 — Sam H. Fawaz

Many IRA owners may not be aware that after their death, the primary beneficiary — usually the surviving spouse — may have the right to transfer part or all of the IRA assets into another account.

Many investors have taken advantage of pretax contributions to their company’s employer-sponsored retirement plan and/or make annual contributions to an IRA. If you participate in a qualified plan program you may be overlooking an important housekeeping issue: beneficiary designations.

An improper designation could make life difficult for your family in the event of your untimely death by putting assets out of reach of those you had hoped to provide for and possibly increasing their tax burdens. Further, if you have switched jobs, become a new parent, been divorced, or survived a spouse or even a child, your current beneficiary designations may need to be updated.

Consider the “What Ifs”

In the heat of divorce proceedings, for example, the task of revising one’s beneficiary designations has been known to fall through the cracks. While a court decree that ends a marriage does terminate the provisions of a will that would otherwise leave estate proceeds to a now-former spouse, it does not automatically revise that former spouse’s beneficiary status on separate documents such as employer-sponsored retirement accounts and IRAs.

Many IRA owners may not be aware that after their death, the primary beneficiary — usually the surviving spouse — may have the right to transfer part or all of the IRA assets into another account. Take the case of the IRA owner who has children from a previous marriage. If, after the owner’s death, the surviving spouse moved those assets into his or her own IRA and named his or her biological children as beneficiaries, the original IRA owner’s children could legally be shut out of any benefits.

Also keep in mind that the law requires that a spouse be the primary beneficiary of a 401(k) or a profit-sharing account unless he/she waives that right in writing. A waiver may make sense in a second marriage — if a new spouse is already financially set or if children from a first marriage are more likely to need the money. Single people can name whomever they choose. And non-spouse beneficiaries are now eligible for a tax-free transfer to an IRA.

The IRS has also issued regulations that dramatically simplify the way certain distributions affect IRA owners and their beneficiaries. Consult your tax advisor on how these rule changes may affect your situation.

To Simplify, Consolidate

Elsewhere, in today’s workplace, it is not uncommon to switch employers every few years. If you have changed jobs and left your assets in your former employers’ plans, you may want to consider moving these assets into a rollover IRA. Consolidating multiple retirement plans into a single tax-advantaged account can make it easier to track your investment performance and streamline your records, including beneficiary designations.

Review Your Current Situation

If you are currently contributing to an employer-sponsored retirement plan and/or an IRA, contact your benefits administrator — or, in the case of the IRA, the financial institution — and request to review your current beneficiary designations. You may want to do this with the help of your tax advisor or estate planning professional to ensure that these documents are in synch with other aspects of your estate plan. Ask your estate planner/attorney about the proper use of such terms as “per stirpes” and “per capita” as well as about the proper use of trusts to achieve certain estate planning goals. Your planning professional can help you focus on many important issues, including percentage breakdowns, especially when minor children and those with special needs are involved.

Finally, be sure to keep copies of all your designation forms in a safe place and let family members know where they can be found.

This communication is not intended to be tax or legal advice and should not be treated as such. Each individual’s situation is different. If you would like to review your current beneficiary designations or discuss any other estate or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch.

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Love, Marriage and Finances

January 28, 2015 — Sam H. Fawaz

Marriage affects your finances in many ways, including your ability to build wealth, plan for retirement, plan your estate, and capitalize on tax and insurance-related benefits. There are, however, two important caveats. First, same-sex marriages are recognized for federal income and estate tax reporting purposes. However, each state determines its own rules for state taxes, inheritance rights, and probate, so the legal standing of same-sex couples in financial planning issues may still vary from state to state. Second, a prenuptial agreement, a legal document, can permit a couple to keep their finances separate, protect each other from debts, and take other actions that could limit the rights of either partner.

Building Wealth

If both you and your spouse are employed, two salaries can be a considerable benefit in building long-term wealth. For example, if both of you have access to employer-sponsored retirement plans and each contributes $18,000 a year, as a couple you are contributing $36,000, twice the maximum annual contribution for an individual ($18,000 for 2015). Similarly, a working couple may be able to pay a mortgage more easily than a single person can, which could make it possible for a couple to apply a portion of their combined paychecks for family savings or investments.

Retirement Benefits

Some (but not all) pensions provide benefits to widows or widowers following a pensioner’s death. When participating in an employer-sponsored retirement plan, married workers are required to name their spouse as beneficiary unless the spouse waives this right in writing. Qualifying widows or widowers may collect Social Security benefits up to a maximum of 50% of the benefit earned by a deceased spouse.

Estate Planning

Married couples may transfer real estate and personal property to a surviving spouse with no federal gift or estate tax consequences until the survivor dies. But surviving spouses do not automatically inherit all assets. Couples who desire to structure their estates in such a way that each spouse is the sole beneficiary of the other need to create wills or other estate planning documents to ensure that their wishes are realized. In the absence of a will, state laws governing disposition of an estate take effect. Also, certain types of trusts, such as QTIP trusts and marital deduction trusts, are restricted to married couples.

Tax Planning

When filing federal income taxes, filing jointly may result in lower tax payments when compared with filing separately.

Debt Management

In certain circumstances, creditors may be able to attach marital or community property to satisfy the debts of one spouse. Couples wishing to guard against this practice may do so with a prenuptial agreement.

Family Matters

Marriage may enhance a partner’s ability to collect financial support, such as alimony, should the relationship dissolve. Although single people do adopt, many adoption agencies show preference for households that include a marital relationship.

The opportunity to go through life with a loving partner may be the greatest benefit of a successful marriage. That said, there are financial and legal benefits that you may want to explore with your beloved before tying the knot.

If you would like to discuss financial planning related to your upcoming or existing marriage or any other investment portfolio management matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch.

 

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Providing for Pets

December 7, 2014 — Sam H. Fawaz

This past summer, the entertainment world lost one of its most prominent and popular figures: Joan Rivers. When her estate planning documents were unveiled, it became clear that she was a careful planner of her legacy–and also a devoted pet owner. One of the most interesting details of her estate plan was the careful provisions Rivers made for her pets.

Rivers left the bulk of her estate to her daughter Melissa and her grandson Cooper–an estimated $150 million in total value. The two rescue dogs who shared her New York residence, and two other dogs who lived at her home in California, were beneficiaries of pet trusts, which included an undisclosed amount of money set aside for their ongoing care, and carefully written provisions that described the standard of living that Rivers expected them to receive for the remainder of their lives.

Traditional pet trusts are honored in most U.S. states, as are statutory pet trusts, which are simpler. In a traditional trust, the owner lists the duties and responsibilities of the designated new owner of the pets, while the statutory trusts incorporate basic default provisions that give caregivers broad discretion to use their judgment to care for the animals. Typical provisions include the type of food the animal enjoys, taking the dog for daily walks, plus regular veterinary visits and care if the pet becomes ill or injured. The most important provision in your pet trust, according to the American Society for the Prevention of Cruelty to Animals, is to select a person who loves animals and, ideally, loves your pets.

The trust document will often name a trustee who will oversee the level of care, and a different person will be named as the actual caregiver. In all cases, the trusts terminate upon the death of the last surviving animal beneficiary, and the owner should choose who will receive those residual assets.

Some states have different laws that require different arrangements. Idaho allows for the creation of a purpose trust, and Wisconsin’s statute provides for an “honorary trust” arrangement. There are no pet trust provisions on the legal books in Kentucky, Louisiana, Minnesota and Mississippi, but pet owners living there can create a living trust for their pets or put a provision in their will which specifies the care for pets. A popular (and relatively simple) alternative is to set aside an amount of money in the will to go to the selected caregiver, with a request that the money be used on behalf of the pet’s ongoing care.

It should be noted that a pet trust is not designed to pass on great amounts of wealth into the total net worth of the animal kingdom. The poster child of an extravagant settlement is Leona Helmsley’s bequest of $12 million to her White Maltese, instantly putting the dog, named “trouble,” into the ranks of America’s one-percenters. Rather than confer a financial legacy on an animal, the goal should be to ease any financial burdens the successor owner might incur when caring properly for your loved animals for the remainder of their lives, including food and veterinary bills.

How long should you plan for the funding to last? Cats and dogs typically live 10-14 years, but some cats have lived to age 30, and some dogs can survive to see their 24th birthday. Interestingly, estate planners are starting to see some pet trusts extend out for rather lengthy periods of time, as owners buy pets that have longer lifespans. For example, if an elderly person has a Macaw parrot as a companion, the animal could easily outlive several successor owners, with a lifespan of 80-100 years. Horse owners should plan for a life expectancy of 25-30 years, and, since horses tend to be expensive to care for, the trust will almost certainly require greater levels of funding. On the extreme end, if you know anyone who happens to have a cuddly Galapagos giant tortoise contentedly roaming their backyard, let them know that their pet trust would need to be set up for an average 190-year lifespan.

If you would like to discuss your estate planning or any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch.

Sources:
http://www.dailyfinance.com/2014/09/11/what-joan-rivers-just-taught-pet-lovers-about-estate-planning/
http://www.dailyfinance.com/2014/08/14/robin-williams-estate-plan-spares-his-heirs-drama/
http://www.1800petmeds.com/education/life-expectancy-dog-cat-40.htm
http://abcnews.go.com/US/leona-helmsleys-dog-trouble-richest-world-dies-12/story?id=13810168
http://www.aspca.org/pet-care/planning-for-your-pets-future/pet-trust-primer

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Bequest or Beneficiary: In Estate Planning, the Difference Is Crucial

September 26, 2014 — Sam H. Fawaz

When planning your estate, be sure you understand the differences between bequests spelled out in a will and beneficiary designations incorporated in retirement accounts.

The scenario plays out over and over again in attorneys’ offices: A family brings a parent’s will to be probated. The will is complete, well-thought-out, and takes into consideration current tax law. But under closer examination, the attorney discovers that the deceased’s estate plan doesn’t work. Why? Because a substantial portion of the parent’s assets pass by beneficiary designation and are not controlled by a will.

Increasingly, investors have the opportunity to name beneficiaries directly on a wide range of financial accounts, including employer-sponsored retirement savings plans, IRAs, brokerage and bank accounts, insurance policies, U.S. savings bonds, mutual funds, and individual stocks and bonds.

The upside of these arrangements is that when the account holder dies, the monies go directly to the beneficiary named on the account, bypassing the sometimes lengthy and costly probate process. The “fatal flaw” of beneficiary-designated assets is that because they are not considered probate assets, they pass “under the radar screen” and trump the directions spelled out in a will. This all too often leads to unintended consequences — individuals who you no longer wish to inherit property do, some individuals receive more than you intended, some receive less, and ultimately, there may not be enough money available to fund the bequests you laid out in your will.

Unnamed or Lapsed Beneficiaries

Not naming beneficiaries or failing to update forms if a beneficiary dies can have its own unintended repercussions, which can be particularly damaging in the case of retirement accounts. For instance, if the beneficiary of an IRA is a spouse and he or she predeceases the account holder and no contingent (second in line) beneficiary(ies) are named, when the account holder dies, the IRA typically would pass to the estate instead of the children directly as the account holder likely would have preferred. This not only would generate a tax bill for the children, it would also prevent them from stretching IRA distributions out over their lifetime.

Planning Priorities

Given these very real consequences, it is important to work with an estate planning professional to ensure coordination between your beneficiary-designated assets and the disposition of property as it is spelled out in your will.

You should also review your beneficiary designations on a regular basis — at least every few years — and/or when certain life events occur, such as the birth of a child, the death of a loved one, a divorce or a marriage, and update them, as necessary, in accordance with your wishes.

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Highlights & Summary of the Tax Relief Act of 2010

December 17, 2010 — Sam H. Fawaz

I promised to keep you updated on the tax bill that was before congress which essentially extends the Bush era tax cuts for two years. Here are the highlights and full summary with more details to come in the next couple of weeks:

On Thursday December 16, 2010, Congress passed the Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010. President Obama just signed the bill this afternoon Friday December 17, 2010.  This legislation, negotiated by the White House and select members of the House and Senate, provides for a short-term extension of Bush era tax cuts made in 2001.  It also addresses the Alternative Minimum Tax (AMT) and Estate, Gift and Generation-skipping Transfer taxes.

The following summary will provide you with key information and highlights from the bill with help from the Financial Planning Association. If you have any additional questions, please do not hesitate to contact me at (734) 447-5305 or at hf@ydfs.com. I hope that you find this summary useful for your personal and business affairs.

HIGHLIGHTS

Two-year extension of all current tax rates through 2012

  • Rates remain 10, 25, 28, 33, and 35 percent
  • 2-year extension of reduced 0 or 15 percent rate for capital gains & dividends
  • 2-year continued repeal of Personal Exemption Phase-out (PEP) & itemized deduction limitation

Temporary modification of Estate, Gift and Generation-Skipping Transfer Tax for 2010, 2011, 2012

  • Reunification of estate and gift taxes
  • 35% top rate and $5 million exemption for estate, gift and GST
  • Alternatively, taxpayer may choose modified carryover basis for 2010
  • Unused exemption may be transferred to spouse
  • Exemption amount indexed for inflation in 2012

AMT Patch for 2010 and 2011

  • Increases the exemption amounts for 2010 to $47,450 ($72,450 married filing jointly) and for 2011 to $48,450 ($74,450 married filing jointly).  It also allows the nonrefundable personal credits against the AMT.

Extension of “tax extenders” for 2010 and 2011, including:

  • Tax-free distributions of up to $100,000 from individual retirement plans for charitable purposes
  • Above-the-line deduction for qualified tuition and related expenses
  • Expanded Coverdell Accounts and definition of education expenses
  • American Opportunity Tax Credit for tuition expenses of up to $2,500
  • Deduction of state and local general sales taxes
  • 30-percent credit for energy-efficiency improvements to the home
  • Exclusion of qualified small business capital gains

Temporary Employee Payroll Tax Cut

  • Provides a payroll tax holiday during 2011 of two percentage points. Employees will pay only 4.2 percent on wages and self-employed individuals will pay only 10.4 percent on self-employment income up to $106,800.

FULL SUMMARY

Reductions in Individual Income Tax Rates through 2012

  • Income brackets remain 10, 25, 28, 33, and 35 percent
  • Capital gains and dividend rates remain at 0 or 15 percent
  • Repeal of the Personal Exemption Phase-out (PEP)
  • Repeal of the itemized deduction limitation (Pease limitation)
  • Marriage penalty relief
  • Expanded dependent care credit
  • Child Tax Credit
  • Earned income tax credit

Education Incentives Extended Through 2012

  • Expanded Coverdell accounts and definition of education expenses
  • Expanded exclusion for employer-provided educational assistance of up to $5,250
  • Expanded student loan interest deduction
  • Exclusion from income of amounts received under certain scholarship programs
  • American Opportunity Tax Credit of up to $2,500 for tuition expenses

Extension of Certain Expiring Provision for Individuals through 2011

  • Above-the-line deduction for qualified tuition and related expenses
  • Tax-free distributions of up to $100,000 from individual retirement plans for charitable purposes.  Donors may treat donations made in January 2001 as if made in 2010.
  • 30-percent credit for energy-efficiency improvements to the home
  • Deduction of state and local general sales taxes
  • Parity for employer-provided mass transit benefits
  • Contributions of capital gain real property for conservation purposes
  • Deductibility of mortgage insurance premiums for qualified residence
  • Estate tax look-through of certain Regulated Investment Company (RIC) stock held by nonresidents for decedents dying before January 1, 2012
  • Above-the-line deduction for certain expenses of elementary and secondary school teachers

Alternative Minimum Tax (AMT) Relief

  • The legislation increases the exemption amounts for 2010 to $47,450 (individuals) and $72,450 (married filing jointly) and for 2011 to $48,450 (individuals) and $74,450 (married filing jointly).  It also allows the nonrefundable personal credits against the AMT.

Temporary Estate Tax Relief and Modification of Gift and Generation-skipping Transfer Taxes

  • Higher exemption, lower rate. The legislation sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes for two years, through 2012. The exemption amount is indexed beginning in 2012. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011. The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year.
  • Portability of unused exemption. Under current law, couples have to do complicated estate planning to claim their entire exemption.  The proposal allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without such planning. The proposal is effective for estates of decedents dying after December 31, 2010.
  • Reunification of estate and gift taxes. Prior to the 2001 tax cuts, the estate and gift taxes were unified, creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests. The proposal reunifies the estate and gift taxes. The proposal is effective for gifts made after December 31, 2010.
  • As noted above. the look-through of RIC stock held by non-resident decedents is extended through 2011

Temporary Extension of Investment Incentives

  • Extension of bonus depreciation for taxable years 2011 and 2012
  • Small Business Expensing: increase in the maximum amount and phase-out threshold under section 179. Sets the maximum amount and phase-out threshold for taxable years 2012 at $125,000 and $500,000 respectively, indexed for inflation.  (Previously-passed legislation raised the 2010 and 2011 max amount and phase-out at $500,000 and $2,000,000 respectively.)

Extension of Certain Expiring Provisions for Businesses through 2011

  • Enhanced charitable deduction for corporate contributions of computer equipment for educational purposes
  • Enhanced charitable deduction for contributions of food inventory
  • Enhanced charitable deduction for contributions of book inventories to public schools
  • Special rule for S corporations making charitable contributions of property
  • 15-year straight-line cost recovery for qualified leasehold improvements
  • Employer wage credit for activated military reservists
  • Tax benefits for certain real estate developments
  • Extension of expensing of environmental remediation costs
  • Treatment of interest-related dividends and short term capital gain dividends of Regulated Investment Companies (RICs)
  • Work opportunity tax credit (WOTC)
  • 100% Exclusion of qualified small business capital gains held for more than 5 years
  • Research credit
  • Qualified Zone Academy bonds

Extension of Unemployment Insurance

  • The unemployment insurance proposal provides a one-year re-authorization of federal UI benefits.

Temporary Employee Payroll Tax Cut

  • The legislation creates a payroll/self-employment tax holiday during 2011 of two percentage points. The employer’s share of the payroll tax remains unchanged.  This means employees will pay only 4.2 percent on wages and self-employed individuals will pay only 10.4 percent on self-employment income up to $106,800.  The social security trust fund is made whole by transfers from the general fund.

Please check out my January-February 2010 Money Magazine Portfolio Makeover-Can I retire Early? http://bit.ly/5aGwIO

Have a small business?  Don’t miss out on these business tax deductions http://bit.ly/a49I1K

6 Ways To Gift Money to Family http://bit.ly/aDG90W

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YDream Financial Services, Inc. is providing this information as a service to its subscribers. While this information deals with tax and legal issues, it does not constitute tax or legal advice and cannot be relied upon as such for avoidance of penalties in matters before the IRS. If you have specific questions related to this information, you are encouraged to consult us, a tax professional or an attorney who can investigate the particular circumstances of your situation.

Sources: U.S. Senate Committee on Finance; U.S. Congress Joint Committee on Taxation

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. Sam is a Certified Financial Planner (CFP®), Certified Public Accountant and registered member of the National Association of Personal Financial Advisors (NAPFA) fee-only financial planner group.  Sam has expertise in many areas of personal finance and wealth management and has always been fascinated with the role of money in society.  Helping others prosper and succeed has been Sam’s mission since he decided to dedicate his life to financial planning.  He specializes in entrepreneurs, professionals, company executives and their families.

All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions.  Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions. This message was authored by Sam H. Fawaz CPA, CFP® and the Financial Planning Association(of which Sam is a member) and is provided by YDream Financial Services, Inc.

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