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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As you’ve probably heard, the government extended the federal income tax filing deadline for individual taxpayers from April 15 to May 17, due to the COVID-19 pandemic. But the extra month doesn’t just give you additional time to prepare your taxes – it also provides you with an extra chance to contribute to some tax-advantaged investments for the 2020 tax year.

First of all, you’ve got more time to fully fund your IRA – in fact, if you don’t already have one, you’ve got until the new tax deadline to open one for the 2020 tax year and then continue funding it for 2021 and beyond. For 2020 and 2021, the IRA contribution limit is $6,000, or $7,000 if you’re 50 or older.

If you have a traditional IRA, your investment dollars are typically tax deductible. So, for example, if you are in the 24% tax bracket, and you put in the full $6,000, your contribution for the 2020 tax year would only “cost” you $4,560, because you’d be able to deduct $1,440 from your taxable income. (Deductibility is gradually phased out at certain income levels.)

And your earnings grow tax-deferred until you start taking withdrawals, typically during retirement. With a Roth IRA, your contributions aren’t deductible, but earnings can grow tax free if you’ve had your account at least five years and don’t take withdrawals until you’re 59½ or older. Eligibility for a Roth IRA also phases out at higher income levels.

What if you own a small business or, like many people this past year, struck out on your own and became self-employed? Business owners who file as sole proprietors also have until May 17 to contribute to, or open, a SEP IRA. (You might qualify for an extension until Oct. 15.) An SEP IRA is similar to a traditional IRA in that contributions are tax deductible and earnings grow tax deferred. For the 2020 tax year, you can contribute the lesser of 25% of your compensation or $57,000. However, special rules govern the maximum deductible contributions, so consult with your tax advisor before finalizing the amount you put in. Also, keep in mind that your estimated taxes for the first quarter of 2021 will still be due on the original April 15 date.

There’s one more area in which the new tax-filing deadline offers you an opportunity: “recontributions” to your retirement plans, such as your IRA and 401(k). In 2020, withdrawal rules were loosened for these accounts for individuals financially affected by the pandemic, and if you took money out, you could spread the taxes over three years. However, during that time, you can recontribute all or part of the withdrawals. And any money you do recontribute before the tax filing deadline of May 17 (or later, if you get an extension) can be excluded on your 2020 tax return, possibly reducing your taxes. So, your recontribution can provide you with more money in your retirement accounts and a tax break today.

One final point: If you’ve already filed your taxes but would still like to claim the extra tax benefits provided by IRA contributions or retirement plan recontributions, you may be able to file an amended return, so check with your tax advisor. In any case, look for ways to benefit from the tax-advantaged opportunities available to you.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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The Staller Center for the Arts and Stony Brook University, in partnership with Campolo, Middleton & McCormick, LLP, a Forbes Top Corporate Law Firm in America, presents a complimentary webinar titled Gift Planning on April 14 at 3:00 p.m. Join them for a comprehensive overview of planned giving and creating a vision to benefit you, your loved ones, and your charity.

Speakers:

Vincent Clark: Intermin Director of Planned Giving at Stony Brook University

Ashley Fetter: Assistant Director of Gift Planning at Stony Brook University

Martin S. Glass, Esq.: Elder Law Attorney at Campolo, Middleton & McCormick, LLP

Date: April 14, 2021

Time: 3:00 p.m.

The webinar is free but registration is required by visiting www.stallercenter.com/giving/

After registering, you will receive an email confirmation with instructions for joining the meeting.

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By Lisa Scott

Every person has dignity and potential. But one in three American adults has a criminal record, which limits their access to education, jobs, housing, and other things they need to reach that potential. Observed in the United States during April since 2017, Second Chance Month is a nationwide effort to raise awareness of the collateral consequences of a criminal conviction and unlock second-chance opportunities for people who have completed their sentences to become contributing citizens. 

NYU’s Brennan Center for Justice reports that the number of people incarcerated in America today is more than four times larger than it was in 1980, when wages began to stagnate and the social safety net began to be rolled back. We’ve long known that people involved in the criminal justice system — a group that’s disproportionately poor and Black — face economic barriers in the form of hiring discrimination and lost job opportunities, among other factors. People who were imprisoned early in their lives earn about half as much annually as socioeconomically similar people untouched by the criminal justice system.

The staggering racial disparities in our criminal justice system flow directly into economic inequality. These consequences are magnified and reinforced throughout a lifetime of discrimination in employment and access to economic opportunity. They are felt by individuals, of course, but also by families and communities. And they are felt in such large numbers, and in such a systemic way, that they constitute a major structural factor in economic inequality.

Suffolk County has the highest parole population in the State, so New York State legislative criminal justice and reentry reform proposals (and action) in 2021 can have a powerful impact for our community members. Here are a few examples :

Relocation So Parents Can Be Closer To Their Children While Incarcerated was passed as Correction Law 72-C

HALT (Humane Alternatives To Long-Term) — Limiting Solitary Confinement was passed and will take effect April 1, 2022. 

Fair and Timely Parole Act (NYS Senate and Assembly Bills S497A/A4346) This would shift the standard for discretionary parole release, moving toward a presumption of release under state law. It would remove language that says an inmate should not be given parole if their release will “deprecate the seriousness of his crime” and under the bill, parole could be denied if there’s a “current and unreasonable risk” the person will break the law if released, and that the risk “cannot be mitigated by parole supervision.” 

Juvenile Offender Second Chance Act (NYS Senate And Assembly Bills S7539/A6491) This would allow a person previously adjudicated a “juvenile offender,” who did not receive “youthful offender” status (converting the criminal conviction to an adjudication), an opportunity to petition the court and get “youthful offender” status on the previous charge when they are: at least 26 years old and fulfill other requirements.

Clean Slate — Automatic Expungement (NYS Senate and Assembly Bills S1553A/A6399) Of particular interest (although less likely to become law this year) is the Clean Slate law that will automatically clear a New Yorker’s criminal record once they become eligible. With more than 400,000 New Yorkers arrested on criminal charges each year, the exclusion of people with criminal records from employment opportunities via background checks and other barriers hurts productivity and deprives the workforce of crucial talent. The ACLU estimates that, nationally, excluding individuals with conviction histories from the workforce costs the economy between $78 billion and $87 billion in lost domestic product. 

Expansion Of Sealing Convictions 160.59 would be a small, positive step but currently is only under discussion in the NYS Senate. 

Voting-Restoration For People On Parole (NYS Senate and Assembly Bills S1931/A4987) Last year, the Governor issued an executive order granting 35,000 voting pardons to people on parole, but that’s just a stopgap measure. This law would make voting rights for people on parole permanent, so that a future Governor could not overturn the executive order. Additionally, it would automate and simplify the process, removing confusion from eligible voters and officials that currently keeps people on parole de facto disenfranchised. 

Other sites that offer information on prison reform and reentry justice are the Prison Fellowship, the Center for Economic and Policy Research, The Vera Institute, The Collateral Consequence Resource Center, Prison Policy Initiative, and The Sentencing Project.

Lisa Scott is president of the League of Women Voters of Suffolk County, a nonprofit, nonpartisan organization that encourages the informed and active participation of citizens in government and influences public policy through education and advocacy. For more information, visit www.lwv-suffolkcounty.org or call 631-862-6860.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

The COVID-19 pandemic may end up changing our lives in some significant ways. To cite one example, it’s likely we’ll see a lot more people continue to work remotely, now that they’ve seen the effectiveness of tools such as videoconferencing. Education, too, may be forever changed in some ways. Perhaps just as important, though, is how many people may now think more about the future – including how they invest.

If you work with a financial professional, you may have connected with this individual over the past several months through a videoconferencing platform, rather than in person. Some people like this arrangement because it offers more scheduling flexibility and eliminates the time and effort of traveling to and from an appointment. Others, however, still prefer face-to-face contact and look forward to when such arrangements will again be practical and safe for everyone involved. But if you’re in the first group – that is, you prefer videoconferencing – you may now wish to use this communication method in the future, at least some of the time.

But beyond the physical aspects of your investing experience, you may now be looking at some changes in your investment strategy brought on, or at least suggested, by your reactions to the pandemic.

For example, many people – especially, but not exclusively, those whose employment was affected by the pandemic – found that they were coming up short in the area of liquidity. They didn’t have enough easily accessible savings to provide them with the cash they needed to meet their expenses until their employment situations stabilized. Consequently, some individuals were forced to dip into their long-term investments, such as their 401(k)s and IRAs. Generally speaking, this type of move is not ideal – these accounts are designed for retirement, so, the more you tap into them early, the less you’ll have available when you do retire. Furthermore, your withdrawals will likely be taxable, and, depending on your age, may also be subject to penalties.

If you were affected by this liquidity crunch, you can take steps now to avoid its recurrence. Your best move may be to build an emergency fund containing three to six months’ worth of living expenses, with the funds held in a separate, highly accessible account of cash or cash equivalents. Of course, given your regular expenses, it may take some time to build such an amount, but if you can commit yourself to putting away a certain amount of money each month, you will make progress. Even having a few hundred dollars in an emergency fund can help create more financial stability.

Apart from this new appreciation for short-term liquidity, though, the foundation for your overall financial future should remain essentially the same. In addition to building your emergency fund, you should still contribute what you can afford to your IRA, 401(k) and other retirement plans. If you have children you want to send to college, you might still explore college-funding vehicles such as a 529 plan. Higher education will still be expensive, even with an expansion in online learning programs.

Post-pandemic life may contain some differences, along with many similarities to life before. But it will always be a smart move to create a long-term financial strategy tailored to your individual needs, goals and risk tolerance.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS®

Financial Advisor from the STONY BROOK EDWARD JONES

Edward Jones. Member SIPC.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

When a co-owner of real property passes away, what happens next depends on how the co- owners took title to the property. 

Upon the death of a co-owner, it is necessary to review the last deed of record to make this determination. There are three ways to own property in New York as co-owners: tenants in common, joint tenants with rights of survivorship or tenants by the entirety.

Only married couples who were married at the time they took title to the property can own property as tenants by the entirety — a type of ownership that provides certain protections. If the property is owned as joint tenants with rights of survivorship or as tenants by the entirety, the deceased owner’s interest passes automatically to the surviving co-owner by operation of law. 

Generally, it is not necessary to have a new deed prepared removing the deceased co-owner. When the surviving owner sells the property in the future, the deceased co-owner’s interest can be disposed of by providing his or her death certificate to the title company. If the surviving owner decides to transfer the property during life for no consideration, such as to a trust for estate planning purposes, a notation on the deed should be made by the attorney who prepares it. Upon future sale, the death certificate will still need to be provided to the title company to prove that the survivor is the legal owner of the property.

If, however, the property is owned as tenants in common or if the deceased spouse was the sole owner of the property, the deceased owner’s interest does not pass by operation of law upon death. Instead, the deceased owner’s interest passes according to his or her Last Will and Testament or according to New York Law if the decedent died without a will.

While New York law technically provides that real property vests in the decedent’s heirs as of the date of death and can be transferred or sold by those heirs, the heirs may have issues with the title company insuring the transaction, especially within two years from the date of death. 

It is typically best to have an Executor or Administrator appointed to transfer or sell the property from the estate. However, in order for a fiduciary to be appointed, a probate or administration proceeding will be necessary in Surrogate’s Court.

It is important to note that if the deed is silent as to whether co-owners took title as tenants in common or joint tenants with rights of survivorship, the default is tenants in common. If the deed is silent but the co-owners were married at the time they took title, then it creates a tenancy by the entirety.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

 

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By Linda M. Toga, Esq.

Linda Toga, Esq.

THE FACTS: 

We just bought our first house from an estate. When we looked at the house with our realtor, most, but not all, of the furnishings had already been removed. The contract of sale provided that the house was being sold “As Is” and was to be “broom swept” at the time of the closing. When we did the walk thru, we were shocked to see that the furniture and household furnishings that were in the house when we first saw it were still there and that the house was quite dirty.

THE QUESTION:

Were we wrong to believe that “As Is” in the context of a real estate transaction refers to the physical condition of the house itself and not to the extent to which it may be furnished? Should the seller have thoroughly cleaned the house before the closing?

THE ANSWER: 

Unless the contract of sale stated that the items left in the house were included in the sale, you were not wrong to expect that the furniture and household items in the house would have been removed before the closing. In the context of a real estate transaction, “As Is” refers to the condition of the structure, the plumbing, the electrical system, the heat/AC systems and the included appliances. It also covers kitchen cabinets, bathroom vanities and built-in bookcases, as well as other items that are attached to the structure itself. 

Despite this fact, the question of whether “As Is” also refers to the presence in the house of personal property such as furniture and furnishings sometimes arises when the seller is an estate or when the property being sold has either been rented or vacant for a long period of time. Under those circumstances it is not unusual for the seller to have no interest in keeping the contents of the house and no desire to pay for their removal. 

To avoid any confusion and conflict, both the seller and the purchaser should discuss with their respective attorney what items of personal property, if any, are included in the sale and confirm that the other party has the same understanding of the term “As Is”. 

As for a house being “broom swept,” courts have concluded that a house is “broom swept” if it is free of furniture, household furnishings, garbage, refuse, trash and other debris. A seller should not, for example, leave a broken freezer in the basement, a dirty litter box in the hallway, decayed food in the refrigerator or cans of paint and other hazardous materials in the garage. By doing so, the seller is not satisfying his obligations under the contract to leave the house “broom swept.”

However, if the house is dusty, if there are crumbs on the counter and some hair on the bathroom floor, a court will still likely find that the house was “broom swept.” If you want assurances that the house will be in move-in condition, you should ask that a provision be added to the contract of sale stating that the seller must have the house professionally cleaned prior to the closing. 

Linda M. Toga, Esq. provides legal services in the areas of estate administration, estate planning, real estate and small business services from her East Setauket office.  Call 631-444-5605 or vising her website at www.LMTOGALAW.com to schedule a consultation

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Sadly, identity theft happens throughout the year – but some identity thieves are particularly active during tax-filing season. How can you protect yourself?

One of the most important moves you can make is to be suspicious of requests by people or entities claiming to be from the Internal Revenue Service. You may receive phone calls, texts and emails, but these types of communication are often just “phishing” scams with one goal in mind: to capture your personal information. These phishers can be quite clever, sending emails that appear to contain the IRS logo or making calls that may even seem to be coming from the IRS.

Don’t open any links or attachments to the emails and don’t answer the calls – and don’t be alarmed if the caller leaves a vaguely threatening voicemail, either asking for personal information, such as your Social Security number, or informing you of some debts you supposedly owe to the IRS that must be taken care of “immediately.”

In reality, the IRS will not initiate contact with you by phone, email, text message or social media to request personal or financial information, or to inquire about issues pertaining to your tax returns. Instead, the agency will first send you a letter. And if you’re unsure of the legitimacy of such a letter, contact the IRS directly at 800-829-1040.

Of course, not all scam artists are fake IRS representatives – some will pass themselves off as tax preparers. Fortunately, most tax preparers are honest, but it’s not too hard to find the dishonest ones who might ask you to sign a blank return, promise you a big refund before looking at your records or try to charge a fee based on the percentage of your return. Legitimate tax preparers will make no grand promises and will explain their fees upfront. Before hiring someone to do your taxes, find out their qualifications. The IRS provides some valuable tips for choosing a reputable tax preparer, but you can also ask your friends and relatives for referrals.

Another tax scam to watch out for is the fraudulent tax return – that is, someone filing a return in your name. To do so, a scammer would need your name, birthdate and Social Security number. If you’re already providing two of these pieces of information – your name and birthdate on social media, and you also include your birthplace – you could be making it easier for scam artists to somehow get the third. It’s a good idea to check your privacy settings and limit what you’re sharing publicly. You might also want to use a nickname and omit your last name, birthday and birthplace.

To learn more about tax scams, visit the IRS website (irs.gov) and search for the “Taxpayer Guide to Identity Theft.” This document describes some signs of identity theft and provides tips for what to do if you are victimized.

It’s unfortunate that identity theft exists, but by taking the proper precautions, you can help insulate yourself from this threat, even when tax season is over.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS®

Financial Advisor from the STONY BROOK EDWARD JONES

Edward Jones. Member SIPC.

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Nancy Burner, Esq.

By Nancy Burner, Esq.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act became  effective on January 1, 2020. While the Act was aimed at improving retirement savings, there is a negative change which affects those who inherit retirement accounts from the original  participant. 

Prior to SECURE, designated beneficiaries of retirement accounts could take  required minimum distributions from the account over their life expectancy. This allowed for  another lifetime of deferred income tax payments and increased growth.  

After SECURE, with few exceptions, beneficiaries will now have to liquidate an inherited  retirement account within ten (10) years. For those with large IRAs and not many  beneficiaries, this equates to a big tax bite! Accordingly, some are looking for ways to structure  the distribution of their retirement account after death in a more tax efficient way. Additionally, some people have serious concerns that a particular beneficiary may not have  the self-control (due to spending habits or addictions) to make the inheritance last their  lifetime.  

A charitable remainder trust (CRT) is an irrevocable trust that distributes a certain percentage of the trust property to the trust’s lifetime beneficiaries either for their life or for a term of up to 20 years. CRTs are most often structured as Charitable Remainder Unitrusts (CRUTs) where the trust document sets forth a certain percentage that will be distributed to the beneficiary for the term of the trust.  

The CRUT must provide that the charity receives ten percent of the present value of the bequest at the death of the participant. So for the individual beneficiary with a shorter life  expectancy, the CRUT can pay out an income stream over the course of their lifetime, much  like the old stretch IRA. If the beneficiary is younger, the trust would need to be for a term of  years in order to comply with the 10% rule (up to a maximum of 20). 

At the end of the term, the lifetime beneficiaries’ interest terminates, and the balance of the trust property is paid to charity of the Grantor’s choosing. 

Why are Charitable Remainder Trusts becoming popular after SECURE? Because these types of trusts are income tax exempt. Accordingly, if you name your Charitable Remainder Trust as the beneficiary of your IRA, at your death, your estate receives a charitable deduction for the portion that is attributable to the charity. Only when your beneficiary receives a  distribution from the trust, will the income portion of the distribution be subject to income tax.  

An example of how the CRUT would work is as follows: The CRUT is named as the  beneficiary of an IRA with $2 million as of the death of the participant. The CRUT cashes out the IRA income-tax-free, then pays a 5% income interest to the decedent’s chosen beneficiary, in this case $100,000 per year. 

Over time, the distribution may fluctuate as the investments increase or decrease in value. However, the income stream lasts for their life, and not just 10 years like it would if you named that beneficiary  directly on the IRA. Essentially, this reinstates the lifetime income stream that used to be available for beneficiaries of retirement accounts. At the death of the beneficiary, the remaining trust assets would be distributed to the charity.  

Some negatives with naming a CRT as the beneficiary are that the beneficiary is limited to an  income stream. If they were named as a beneficiary on the IRA directly, they could remove as  much as they would like, although every penny is taxable as ordinary income. 

The calculation on whether or not the CRT provides more in the hands of the beneficiary is going to depend on may things, such as how long they live and how much the assets grow. The longer the term  of the trust and the larger the trust assets, the more income the beneficiary receives. Thought of another way though, even if they receive roughly the same, there is a huge charitable gift at the end of their life as well which not only results in a charitable deduction, but fulfillment of goodwill.  

The desire to name a CRT as the beneficiary of a retirement account definitely has more appeal than ever after the SECURE Act, but like anything else in the estate planning arena, it’s not a one-size fits all. If you have retirement accounts and are charitably inclined, speak to your estate planning attorney to see if this is the right strategy for you. 

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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The Hamptons turned red in honor of American Heart Month on Feb. 5. Burner Law Group, an all-female law firm, lit up their Westhampton Beach location in red to raise awareness for women’s heart health. Nancy Burner‚ Esq. the founder of Burner Law Group‚ P.C, and her daughter Britt Burner, Esq., have teamed up with Northwell Health and the Katz Institute for Women’s Health to bring wellness initiatives to the east end. Britt is a member of the Katz Institute Advisory Council.

Pictured from left, Amy Loeb, Ed.D, MBA, RN, Executive Director, Peconic Bay Medical Center; Nancy Burner, Esq.; Britt Burner, Esq.; and Stacey Rosen, MD, Senior Vice President, Women’s Health at Northwell Health and Partners Council Professor of Women’s Health.

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By Linda Toga, Esq.

Linda Toga, Esq.

THE FACTS: 

My mother died recently. Her will provides that I am the executor of her estate and directs that her estate is to be divided equally between me and my two siblings. In addition to her bank account and her home, my mother had an inherited IRA and a Roth IRA. My sister is the beneficiary on the inherited IRA and my brother is the beneficiary of the Roth IRA.

THE QUESTION:

Based upon my mother’s will, am I entitled to 1/3 of the assets in the IRAs?

THE ANSWER: 

The quick answer is NO. Regardless of whether it is a traditional IRA or a Roth, how the funds in an IRA are distributed upon the death of the account holder is governed by the beneficiary designation form associated with the account. A will only governs the distribution of probate assets which are assets that are owned individually by the decedent and are not subject to a beneficiary designation. The only time assets in an IRA would be subject to the terms of a will is if none of the people named on the beneficiary designation form associated with the IRA were alive at the time of the account holder’s death.

Unfortunately for you, unless your siblings chose to share some of the funds they receive from the IRAs with you, you are only entitled to 1/3 of your mother’s probate assets after all of her last expenses and the expenses of administering her estate are paid. 

Interestingly, even if the balance in each of the IRAs is the same, it is unlikely that your siblings will enjoy equal shares of your mother’s estate. While they are both entitled to a share of the probate estate that is equal to your share, your sister will have to pay income tax on the distributions she receives from the traditional IRA while your brother will receive all of the assets in the Roth IRA income tax free. 

If your mother wanted you all to share equally in her estate, she should have named all of you as equal beneficiaries on both of the IRAs. In the alternative, her attorney could have added language to her will that provided that the value of any non-probate assets passing to her children was to be taken into consideration when calculating the share of her probate assets passing to each of her children. If your mother’s will directed you to consider non-probate assets when distributing her probate estate, you would get a larger share of the probate assets to compensate for the fact that you were not named as a beneficiary on either of the IRAs. 

Although you are not entitled to funds in the IRAs, the fact that you are named as the executor of your mother’s estate entitles you to statutory commissions. Commissions are based on the value of the probate estate and can be significant. Oftentimes when a family member is the executor, he/she elects to not take commissions since doing so decreases the size of the estate that is distributed to the beneficiaries. 

However, if you feel strongly that your mother’s wish was that you received as much from her estate as your siblings, and your siblings do not feel inclined to share with you some of the non-probate assets they receive from the IRAs, you may want to consider taking commissions to help balance things out. 

The fact that your mother’s wishes may not be realized highlights the value of working with an experienced estate planning attorney and the importance of considering all of your assets when engaging in estate planning. If you do not take into consideration jointly held property and accounts, transfer on death designations, retirement plans and life insurance policies when engaging in estate planning, there is a good chance that your estate plan will not accurately reflect your wishes. 

Linda M. Toga, Esq. provides legal services in the areas of estate administration, estate planning, real estate and small business services from her East Setauket office.  Call 631-444-5605 or vising her website at www.LMTOGALAW.com to schedule a consultation. 

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