Think back to when you first started investing in the account. Remember what you were told? See if this sounds familiar:

1) Put money away today in a retirement account and you’ll be able to use your contribution as a tax deduction against your other income.
2) Invest the contribution that you made to the retirement account whenever you want and the growth on that contribution will grow tax deferred
3) When you retire, and begin to take withdrawals from your retirement account, you’ll be able to put money away on a tax deductible basis when you’re in a higher tax bracket and take money out during retirement when you’re in a lower tax bracket.

Assuming that you were told all three things when you started to contribute to a retirement plan, my question for you is this: Were all three things true?

My experience working with clients tells me that in many cases only 2 of these 3 things were proven true – remember 3 above, for many clients, was not.

Don’t get me wrong, IRA’s and retirement accounts are useful products, but many folks who put money away in one tax bracket while they were working are now retired and drawing money from these retirement accounts only to find out they’re actually in a higher tax bracket now that they were when they were putting the money away.

Why did that happen?

It could be a number of reasons, but in many cases the culprit is the fact that the IRS (Internal Revenue Service) code, the rules that the ‘tax’ game is played by, changed.

In fact, under today’s tax code, if your estate is large enough, up to 67% of your IRA could be lost to tax at death, unless you do appropriate planning.

This assumes maximum federal estate and income tax, and no state income tax. If your state has income tax, your tax may be higher. For example: $500,000 IRA @ 45% Estate tax. Remaining taxed at 35% Federal Income Tax Rate. Total tax of $322,500 which is approximately 65% of $500,000

That’s where the SmartIRA planning strategy may come in. The SmartIRA planning process is designed to reduce, or in some cases, even eliminate taxes on a client’s IRA. However, the outcome of the strategy is dependent upon the circumstances of your individual situation, so results will vary.

If you have an IRA, you may want to get more information about the SmartIRA planning process.

Remember this special note: With traditional IRA’s, early withdrawals may be subject to a surrender charge. I addition, distributions prior to age 59 1/2 may be subject to a 10% tax penalty.

Author:  Robert G. Poage Jr. – Wealth Enhancement & Preservation Strategies – Call (916)784-0520

But rather than tangible assets such as money or possessions, ethical wills bequeath values, beliefs, and ideals to loved ones.

If you want to pass along your personal ideas and values, in addition to a financial inheritance, then you will need to create an ethical will.

An ethical will is a written document that includes instructions for life, morals, values and family stories that one generation hopes to pass on to the next. Ethical Wills are gaining in popularity today as some people want to find a way to leave their loved ones with “values” instead of just “valuables.”

Unlike a last will and trust, ethical wills are not legally binding documents. Ethical wills can come in a variety of forms, from a short letter to a lengthy autobiographical statement, from an audio-recorded message to a bound album.

Some people will choose to share their own ethical wills during life, usually at an important date, such as an anniversary or family milestone like sending children to college or at their own retirement.

Ethical wills have now seemed to have gone mainstream. They are a way to share personal life experiences, lessons and ideals with the people you love. Drafting an ethical will can really help you clarify and articulate what’s important to you, how you want to be remembered and the qualities you hope your family will embody for generations to come.

An important aspect of an ethical will is you are not telling anyone what to do or think, but rather providing your loved ones with a specific reminder of you and your personal beliefs.

An ethical will can also offer practical guidance to your heirs. You can use one to assist your family in understanding how you want them to handle emergencies or any changes in circumstances, such as the need for any special financial or medical assistances.

If an ethical will is right for you, then please take the time and create one. But first , you should make sure that you have an estate plan. If you already have an estate plan, then make sure it is up to date.

Remember, an ethical will is not a legal document and is not enforceable by our legal court system. Therefore, an ethical will can not be used in place of the financial documents detailed in your own estate plan.