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The IRS
recently announced the new cost of living adjustments to the annual limits on
retirement contributions for 2019. These are the limits that outline the amount
of money you can contribute to certain tax benefited retirement plans. This can and should affect how you formulate
your Tennessee estate and retirement planning.
A really good strategy for long term estate planning is to make sure a
significant portion of your assets are in these tax advantaged accounts.
The new 2019 annual limits for contributions
to a 401(k), 403(b), most 457 plans and the federal government Thrift Savings Plan
increases for 2019 to $19,000.00. This is
the first change we have had in a few years and it is certainly good news for
retirement savers. The annual catchup contribution
allowance for these plans, available to those over 50, stands at $6,000.00 for
2019. As a result, someone over the age of 50 can
contribute $25,000.00 annually to their 401k starting in 2019.
The limit for contributions to an IRA (Roth
or normal IRA) also went up in 2019. It is
now a limit of $6,000.00. For those who
take advantage of the Roth IRA, the AGI (Adjusted Gross Income) phase-out level
for the ability to contribute was adjusted up for 2019. The phase-out now begins at $193,000.00 for
married couples filing jointly and $122,000.00 for singles and heads of
household. Once you hit these levels, the
ability to contribute begins to phase out until it is eliminated on a gradual
scale.
It is important to work to update your
beneficiary designations on your retirement and other accounts while you review
if any of the above changes can affect you.
In Tennessee, if you have a proper beneficiary designation, these assets
can pass outside of probate. If you do
not have any designation or if you name your estate the beneficiary, then this
money will pass through your estate in the probate process. This will certainly extend the time it will
take to get to the proper beneficiaries.
Sometimes this is necessary or preferred, but it is really important to
make an informed decision on this issue.
Many times, the beneficiary designations do not match the terms in the Will
- and this is usually unintended. Life
circumstances also change and this is an important thing to remember so your
beneficiary designations match your intentions that are expressed in your Will.
Follow me on Twitter at @jasonalee for updates from the Tennessee
Wills and Estates blog.
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