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Retirement plan limits for 2021

To make it possible for voluntary retirement savings to keep up with inflation, the various numerical limits embedded within qualified retirement plans are indexed for inflation. However, for 2021 the IRA contribution limit stays at $6,000 if the individual is younger than age 50, and $7,000 if he or she attains age 50 or older in 2021. Other limits are shown in the following table:

 

Item

2021 limit

401(k) and 403(b) employee deferral limit

$19,500

457 employee deferral limit (most plans)

$19,500

Catch-up contribution limit

$6,500

Defined contribution dollar limit

$58,000

Defined benefit dollar limit

$230,000

Compensation limit

$290,000

Highly compensated employee income limit

$130,000

Key employee in a top-heavy plan

$185,000

 

Catch-up contributions are permitted by those employees who are 50 years of age or older during the calendar year.

Personal saving for retirement never has been more important.  These tax benefits make saving a bit less painful.

 

Article ©2020 M.A. Co. All rights reserved. Used with permission. 

A new scam to watch out for

This actually happened to an acquaintance of ours who we will call Jim.

A few years ago, one of Jim’s credit cards from a major card issuer stopped working. He called the issuer and was told that his card had been suspended when it was observed to purchase meals in two states hundreds of miles apart, a sure sign the card numbers had been stolen.  The bogus charges were erased, and Jim’s confidence in the card issuer went way up, given their diligence.

About a month ago, Jim received a robocall from the card issuer, saying that his card had been compromised again.  Instead of replying to the call, he went online to check his purchases. Sure enough, there were several bogus charges.  Jim called the issuer to have his card cancelled and a new one issued.

Jim only had the new card for about a week when he got the same robocall again, exactly the same except for the return call number.  Unbelievable! He almost replied to the call but decided to first check out how his card had been misused.

There were no bogus charges.

The second robocall warning that his card had been compromised was a scam.  A scam that managed to use the nearly identical warning call that the legitimate card issuer used!

Was this just a coincidence, getting a scam call so soon after getting a replacement card? Or did the scammers have some inside information on who is getting a new card, and using familiarity with the robocall warning to put victims at ease, making them more vulnerable?

We do not know the answer to that question.  What we do know is that constant vigilance is always required.  Although some robocalls are legitimate, some may not be. The better practice is to call a card issuer’s number provided on the credit card, rather than responding to the telephone number provided in any robocall.

 

Article ©2020 M.A. Co. All rights reserved. Used with permission. 

Ask a trust officer: Travel trusts

DEAR TRUST OFFICER:  I immigrated to this country from Norway as a child, and I have relatives there with whom I remain close.  One of my children lives in Oslo now and may be settling there permanently. For several years, I’ve helped fund some family reunions.  The get-togethers alternate between the U.S. and Oslo, and I help plan the trips and side tours.  I also cover the cost of airfare. It’s been a great thing for cementing the bonds of the extended family.  We had to suspend this family tradition in 2020 with the pandemic and all, and everyone really missed it—especially me.  What I’m wondering is, can I add something to my will to keep this tradition going after I’m gone?—FAMILY TRAVELER

DEAR TRAVELER:  I suggest that you consider an irrevocable trust in your will, with the express purpose of providing financial support for travel for your heirs.  The trust will likely include other provisions related to the financial security of your heirs.  The trustee can be given some discretion in these matters, but only within the parameters that you and your attorney set out in the trust agreement.

If you choose a corporate fiduciary, such as us, your trust will have the additional benefit of professional investment management.  We are well-versed in all aspects of fulfilling fiduciary duties.

 

Article ©2020 M.A. Co. All rights reserved. Used with permission. 

The “perfect storm” for estate planning

According to estate planner Maurice R. Kassimir, Esq., the present moment has provided a “perfect storm” for wealthy families to meet with their estate planners and implement some wealth transfer strategies. In a November webinar, Mr. Kassimir pointed to three factors that make these times unique:

  • The prospect of higher taxes on “the rich.” The scheduled 2026 drop in the federal transfer tax exemption remains in place. Although few now predict that the drop will be accelerated, even fewer predict that the current exemption levels will be made permanent. Thus, there is every incentive to make large gifts soon to “lock in” the higher amounts, $11.7 million per person in 2021. What’s more, the yawning federal budget deficits are likely to be addressed with higher taxes, with most of the burden targeted to the wealthy.

  • Covid-19 has caused valuation discounts to soar. Economic pain and uncertainty reduces the value of many assets, notably small businesses and especially real estate, even though publicly traded stocks seem to be doing well. Mr. Kassimir observed that in New York City, the value of some commercial real estate is down as much as 75% as tenants are no longer able to pay their rents. With such large discounts in place, the $11.7 million lifetime exemption from gift tax will shelter far more in assets than would have been true one year ago.

  • Historic low interest rates. The low interest rates provided by the IRS tables makes this an exceptionally good time for many estate planning strategies, such as grantor-retained-annuity trusts (GRATs). The November 2020 7520 mid-term rate was just 0.47%.

Implicit in these examples is an assumption that most asset values will return to normal after a vaccine brings the pandemic to an end. The other problem planners may face is that in times of severe economic uncertainty, even those with $20 million in assets may not feel rich enough to part with a substantial portion of them simply to save taxes for their heirs.

 

Article ©2020 M.A. Co. All rights reserved. Used with permission. 

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