Navigating Around An Inherited IRA Pitfall

Even the most avid followers of the Supreme Court's docket may have passed over a recent decision about retirement accounts with a shrug.

A ruling on IRAs lacks the headline appeal of more politically charged cases like those concerning same-sex marriage or the Affordable Care Act. However, this decision may have a direct impact on your life - specifically, your estate plan - in a way that other, more media-ready cases will not.

The point of contention in the case was how the Internal Revenue Service should treat funds in an IRA that the owner has inherited upon the original owner's death. In a unanimous decision, the Supreme Court drew a sharp distinction between inherited IRAs and other retirement accounts, ending a series of back-and-forth decisions on the matter from the lower courts.

Heidi Heffron-Clark inherited an IRA from her mother, Ruth Heffron, in 2001 upon Heffron's death. Nine years later, Heffron-Clark and her husband filed for bankruptcy, but claimed that the inherited IRA was sheltered from creditors' claims, just as an IRA she established herself would have been. Justice Sonia Sotomayor, who wrote the Supreme Court's opinion, said the Bankruptcy Code makes it clear that inherited IRAs no longer qualify as retirement funds for three reasons: The holder of an inherited IRA may not make additional contributions to the account; the holder must withdraw money from the inherited IRA, regardless of the holder's age; and the holder may withdraw the entire balance at any time, for any reason, without penalty. Because of these characteristics, the Court said, it is clear that such accounts should not be treated as retirement funds.

On its face, I believe this decision makes sense. The intent of the bankruptcy provision protecting retirement funds is to ensure individuals who file bankruptcy have some assets to meet their needs during retirement. In the case of a traditional or Roth IRA, restrictions on distributions ensure that the funds will most likely be used during retirement. With some exceptions, owners of such accounts cannot make withdrawals before age 59 1/2 without facing a 10 percent penalty. There is no provision, however, that would inhibit a person from distributing the assets held in an inherited IRA as they please.

Ruth Heffron did not incur debts to her daughter's creditors, and she presumably intended to use her IRA money primarily for her own retirement needs. Her early death prevented her from doing so, and according to the Supreme Court, eliminated retirement as a principal purpose of the inherited IRA. Had Heffron bequeathed an ordinary brokerage account to her daughter rather than an IRA, Heffron-Clark's creditors would have been able to make claims against the inheritance. The high court saw no reason to treat the inherited IRA funds differently.

So what does the decision mean for current IRA account holders?

First, it is important to note that if you name your spouse as your IRA's beneficiary, the rules are a bit different than they are for others. Your spouse can treat an inherited IRA as his or her own, by rolling it over to an IRA in his or her own name. The inherited IRA's assets would then be subject to the same rules as ordinary IRAs, including protection from creditors. However, spousal beneficiaries under 59 1/2 years old should not automatically proceed with such rollovers. If the surviving spouse needs to use the inherited IRA funds, the 10 percent penalty will apply to withdrawals from the rollover IRA. Withdrawals from the deceased spouse's IRA are not subject to the early withdrawal penalty. It is therefore a good idea to leave enough assets in the inherited IRA to cover the survivor's anticipated current needs and roll over the remainder.

If you plan to name anyone other than your spouse as your IRA's primary (or secondary) beneficiary, the decision means you may want to consider a more sophisticated estate planning arrangement. A sensible alternative is to name a trust established for your heir (or heirs) as the IRA's beneficiary. The trust would then serve to shelter the IRA assets from the beneficiary's creditors in the case of bankruptcy.

Individuals who take this approach should carefully comply with the IRS' rules to construct what is known as a "see-through" trust. Otherwise, you may trigger a requirement to pay out the IRA within five years of the original owner's death, thus mainly defeating the trust's purpose. Professional help is almost always advisable when setting up a trust, but in this case, you should be especially careful that the trust is set up properly.

Trusts also have disadvantages. They can be expensive to establish and maintain, and may be unnecessary if your beneficiary never faces bankruptcy, divorce or other legal claims. Setting up a trust as your IRA beneficiary also means your spouse can no longer roll over the IRA if desired. Important to note, too, is that separate account treatment is never available for benefits paid to or through a trust, which means distributions will be based on the life expectancy of the oldest beneficiary if the trust has multiple beneficiaries. The rules for determining the oldest beneficiary are not always intuitive.


Do you need a trust if you plan to name someone other than your spouse as the beneficiary of your IRA? Like most estate planning choices, it depends. You should weigh the extra protection of a trust against the work and expense of setting up and administering it. You may also want to frankly consider the likelihood that your beneficiary will need such protection - being mindful that a person's financial situation can change unexpectedly.

This IRA case may not hold the cachet of other Supreme Court decisions. But for retirement savers making choices about IRA inheritance, its impact will be felt far and wide.



By ReKeithen Miller

Managing Credit Through Divorce

When you get divorced, the person you thought was "the one" might not be the only thing you lose - your credit score could also suffer! Yes, financial problems have the potential to crop up during a divorce, especially if you've co-signed loans with your soon-to-be ex. Divorces can be messy enough, but yes, they can take a toll on your credit too!

With that being said, here's a look at some ways to manage your FICO score through divorce, so you're not stuck in a lengthy credit repair plan later:

Close or refinance all shared accounts: During a split, courts will divide shared debt through what's called a divorce decree. But what the courts and lawyers won't tell you is that these decrees don't eliminate shared responsibility. For instance, if your ex is tasked with paying the auto loan and misses a payment - the late payment will show up late on your credit report too, hurting your score and staying with you for years! So along the lines of a credit tip, don't take any chances and refinance any loans that were previously shared if you're able to.

Cooperate with your ex: While you're divorcing for one reason, it's important to work with your ex on your finances for the sake of not having to repair credit down the line. Remember that any late payment, deliquency, or high credit card balances can harm both your credit score and you ex's report. Hence, along the lines of our first bullet point - not every loan can be refinanced quickly. So for loans that can't, be sure that you strike a truce with your ex to ensure that payments are made. If they're not they hurt both of your credit scores. Online accounts and automatic payments are ways to make this easier.

Credit monitoring: Divorces can get messy, and there's no telling what your ex might do to your credit score as a means of revenge if they know of your social security number and financial details. Of course, even though this is a bit extreme, there is no reason why you shouldn't take the measures to prevent it. That's why signing on to a credit monitoring service is a good idea - it'll immediately make you aware of any changes to your credit data, potentially permitting you to avoid implementing a big debt management plan later for the damages incurred.



By Nikitas Tsoukalis

Practices of an Effective CEO

Is infinite knowledge about one's company all that is required of a CEO? The answer should be a resounding "No". Without solid leadership skills even the most informed CEO will fail. This is not an overstatement…it is a proven truth.

According to Investopedia.com, A CEO is defined as: "The highest ranking executive in a company whose main responsibilities include developing and implementing high-level strategies, making major corporate decisions, managing the overall operations and resources of a company, and acting as the main point of communication between the board of directors and the corporate operations".

Because we know that the CEO has the final word regarding corporate decisions, it is expected that he/she is armed with all the pertinent facts associated with the decision at hand. On the other hand, can we also expect that he/she has the courage to utilize that information to implement and/ or modify strategies that will benefit the company? Two inquiries almost always associated with a CEO's decision making process include a review of: What was expected to happen? opposed to What actually happened? Once all the facts are obtained, the CEO will review the ramifications reflected on the budget report. If prepared accurately and astutely, a budget report should:
- Describe the plan of action, including a calculation of any and all resources associated with the project:
- Compare actual expenditures with planned expenditures
- Compile precise accurate numbers on a continuing basis
- Report numbers first and then clarify what they represent
- Utilize accurate percentages rather than hard and fast numbers to facilitate management's most successful understanding of the data

The cash conversion cycle is another factor required to assist a CEO in making wise strategic decisions for the company. He/she must be provided with information that enables a determination of time required for:
- A sale to result in delivery
- An invoice to result in:

a) Payment from the customer
b) Payment to staff
c) Recovery of costs of goods
d) Payment of general expenses including commissions and marketing
e) Final realization of net profits from sale Information on expense ratios also remains an imperative requirement in the CEO's decision making process.

Appropriate data should include:

- Percentage of delivery cost to client
- Comparisons of cash conversion cycles as they relate to various products
- A determination regarding the significance of the difference

For the CEO's assessment to be truly comprehensive, it must be not only accurate, measured, and timely from a fiscal perspective, but also honestly representative of the relationships among the various functioning parts of the business. Then and only then, can an assessment be justly evaluated.

When all is said and done, the effective CEO will know where the company actually stands versus where it should be and render a verdict accordingly. It is here where leadership manifests itself, it is here that a true leader will emerge. A CEO must be an individual who enlightens and inspires his team. His leadership must be wise and motivating. In the words of John Quincy Adams:
"If your actions inspire others to dream more, learn more, do more and become more, you are a leader".



By Edward A DuCoin

What You Need To Know About Dogecoin

Dogecoin is a cryptocurrency that was created by Billy Markus, a Portland programmer.

The use of the currency began as a meme-based joke where Jackson Palmer, a member of adobe systems was asked by a student to make the dogecoin idea a reality. Palmer went ahead and purchased the dogecoin domain and created a very attractive website.

A month and half later after the currency was released to the world, it become the third most valuable altcoin with a market cap of $53 million.

Although, it may seem complex to understand how the currency works, there are many resources that you can use to your advantage.

Research has shown that there are many people who are visiting the sites using the coins. The reason why there are so many people visiting the sites using the currency is because the people want to understand how the currency works from firsthand experience.

Many people making use of the currency are gamers and college students. These people play the games using the currency or send money to their friends. The most exciting thing about receiving dogecoins is that it's very satisfying.

This is because when you receive the currency you appear as if you have received a lot of money. For example, when you are given 500 dogecoins you will see as if you have received a lot of money which will give you a high self esteem. These advantages have made dogecoin to be very famous and its use has greatly increased.

The currency has also played a major social part where it has been used in raising money for worthy causes. For example, the currency aided in raising over $3,000 that was used in funding the Jamaican bobsled team to the Sochi winter Olympics.

After doing this, the currency played a huge role in raising $25,000 that was used in helping children living with disabilities. There are many other initiatives that are in place that aim at making a difference in the society.

Although, the currency has been successful, it has suffered a number of setbacks. One setback is where the reserve bank of India cautioned Dogecoin users from using the currency due to the risks that ware involved with it. Due to the caution given by the bank, many people stopped using the currency.

Another setback is the 2013 theft where millions of coins were stolen during a hacking attempt. This made some people to be over cautious when using the currency.

By Duncan Lancer

Why You Shouldn't Co-Sign on a Loan

Credit isn't exactly easy to come by these days. And if you happen to have a good credit score, there's a chance that sooner or later you'll be approached by a friend or family member and asked to co-sign on a loan or credit card for them. By doing so, the person with poor or limited credit is able to leverage your positive score for a better interest rate. But is credit a win for you, the co-signer, as well?

The answer: Not necessarily. While you agreeing to be a co-signer is likely done with nothing but good intentions, the outcome could turn out to be far from favorable for you. We're talking a decreased credit score, collection agencies coming after you and even potential lawsuits. Here's a closer look at why you should think twice about co-signing on a loan:

Lower credit limit: Like we said in the opening, credit is limited these days. So if you co-sign on a loan, you're debt ratio might get too high. Not only is this unfavorable for your financial situation - after all, you're responsible for the debt - but it can lower your overall score, resulting in credit repair to get your score back up to what it was.

Missed payment: Is the person you're co-signing for reliable? We ask because if the person misses a payment, the collection agency can come after you for it. It's not what a lot of people have in mind when they agree to co-sign, but unfortunately it becomes a common reality. You need to be vigilant and protect your credit score, anyway possible.

Lawsuits: As a co-signer, you're just as responsible for the debt as the other signee. So if the other signee defaults on the loan payment, you could potentially be sued for the amount owed.

Simply put, if we're offering credit tips, we'd advise you to co-sign with caution. If you're approached by a reliable person who has a limited credit history or finances or you are trying to help out your child with his or her first car loan, that's one thing. But if you're approached by someone you know is shady and unreliable, that's a whole different story. So co-sign with caution - because if you're not aware of the consequences, you could end up on a lengthy quest to repair credit and enact a debt management plan to cover for someone else's blunder

By Nikitas Tsoukalis

Not All Credit Scores Are Created Equal

When it comes to your credit score, you're likely already familiar with your FICO score. It is, after all, the most common type of score that creditors check before approving you for a home loan, car loan, etc. But there's more than just the FICO score that creditors may check when it comes to looking up your finance history. Vantage and PLUS scores are two in particular that come to mind.

So what are the key differentiators between FICO, Vantage, and PLUS? Here's a closer look:

FICO The FICO credit score, which ranges from 300 to 850, is made up of five main categories: Payment history, 35 percent Amounts owed, 30 percent Length of credit history, 15 percent New credit, 10 percent Types of credit, 10 percent

As you can see from the FICO score makeup, the single most important thing is credit history - so here's a credit tip - pay your bills on time. It's why making on-time payments is such a crucial piece of credit repair. Debt and debt management is the next most important thing and the score is, rounded out by how diverse your credit is, new lines of credit you've opened, and how long your credit history is.

Vantage Unlike the FICO score, the Vantage score essentially judges you on your last 2 years of credit and delivers your score in a range from 501 to 990. Unlike the FICO score, which takes into account 5 components of your credit history, Vantage measures you on 6 categories. Here's a look at what they are and how significantly they weigh into your overall score: Payment history, 32 percent Utilization, 23 percent Balances, 15 percent Depth of credit, 13 percent Recent credit, 10 percent Available credit, 7 percent

Many of the categories are similar to FICO, and there's the "payment history" category, which takes tops in importance on its own. But the Vantage score includes a separate "Utilization" category, which measures debt-to-credit ratio, and "Balances." In FICO, those two categories are somewhat grouped together. So while on-time payments are also important to repair credit with the Vantage score, there's almost a greater emphasis on debt-to-credit ratio and debt.

PLUS Score The score is measured between 330 and 830. It's considered more of an "educational" score rather than one that's used by lenders, but it's nevertheless still a score. It's a scoring system developed by Experian. Here's a look at the breakdown: Payment history, 31 percent Credit usage, 30 percent Age of accounts, 15 percent Account types, 14 percent Inquiries, 10 percent



By Nikitas Tsoukalis

Why Business Owners Need a Business Valuation

Whether you own a start-up business or a seasoned enterprise, your business must be evaluated to determine its value today as represented by its future economic benefits. We'll address the "why" shortly. The valuation of your business can quickly become complicated, and is even further compounded by the multitude of lenses through which the valuation can be measured.

There are several methods by which you can conduct a valuation. Should your business valuation be conducted using the income method, or the market or asset methods? Which one of these methods is the best choice for your circumstances? How do such influences as economic trends, industry factors, regulations, competition, and intangibles affect the value of your business?

This is why you will need the advice of a person professionally trained in business valuation, such as a Certified Valuation Analyst (CVA). A CVA, for example, must complete an extensive course of study, demonstrate that he or she has sufficient business experience, provide references and complete a five-hour examination.

While certainly not an easy task to complete, trained professionals who know how to work closely with you to identify the financial strength of your business will expertly guide the valuation process to the best conclusion for your purposes. We recommend that you work with a CVA that has years of experience working with different types of companies and who has performed valuations using each of the business valuations mentioned above.

What is your purpose?

What is the reason for your business valuation? We call this 'defining the engagement', and like most first steps, it sets up the path for the valuation work, so it is an important detail.

Among the more common reasons for conducting a business valuation:

- Selling or acquiring a business

- Establishing or updating a buy/sell agreement

- Bringing in a new partner or new investor

- Establishing an estate tax planning or gifting tax planning strategy

- Settling a divorce

- Liquidating a business

- Considering providing stock options

- Preparing for buying new or more insurance

- Buying out a partner

- Seeking business financing

- Establishing an Employee Stock Ownership Plan (ESOP)

- Considering making a sizable gift or supporting a charity

- Converting from a C corporation to an S corporation

There are others reasons for a business valuation, but the ones noted above are the major ones. Regardless of your reason for engaging a valuation firm, it is important to know what your business is worth in the market today and what it will be worth in the future. Armed with knowledge, you can forge ahead to build a successful financial future.

By joe mas

Paid Collections Don't Automatically Get Removed

Are you one of many Americans who have collection accounts on your credit report? If so, you unquestionably want it to just go away. This is a pivotal part of credit repair but raising your credit score back up to a favorable status is much easier said than done. That's because according to U.S. law, collection accounts can be reported in your credit history for seven-and-a-half years from the original date you fall behind on payments.

Yikes!
Seven-and-a-half years. That's a long time a bad record can weigh down your FICO score. Even worse, it's possible that you can settle your debt with a collection agency and the record will still weigh down your credit score. Why? Because collection agencies are required to report information that is both accurate and complete and that includes this negative aspect of your credit history.So now that you know why collection agencies won't wipe a record clean, even after you've settled your debt, you might be wondering if there's anything you can do? I mean, 7.5 years is a long time to wait out a bad record.

The good news is that there are some things you can do to wipe bad records from your report early, thereby allowing you to advance and repair credit. The bad news is these things are not sure-fire. Here's a look at a few credit tips for working with collection agencies on this matter:

First, pull your credit history so you know what's being reported. There's a chance you might find an inaccuracy within the report, which can lead to a favorable outcome, as collection agencies aren't legally allowed to report inaccurate or incomplete information.

Negotiate a "pay for removal" debt management deal: If you haven't settled any debt yet, contact the collection agency and see if they will remove your record should you settle the debt. Many will likely respond and say that they're unable to remove the record, as credit reporting agencies frown upon this policy. But it's worth a shot.

Build new, positive credit: Part of your credit score is based on any new credit you're building. So if you're striking out with getting records removed from your credit report, it may just be best to cut your losses and focus on building new credit. As time goes on, these negative records will have less of an impact on your overall score, as long as your finances and credit history are headed in the right direction



By Nikitas Tsoukalis

Maximize Your Score With Different Types of Credit

There are five main factors that make up a FICO credit score - payment history (35% of your FICO score), amounts owed (30%), credit history length(15%), new credit and types of credit used (each 10% of your score). While the "types of credit" category only factors for about 10 percent of your overall FICO score, it can mean the difference between a good score and a great score, so it's a category not to overlook if you're on a mission of credit repair.

First, it's important to note that there are two main types of finance loans: revolving and installment. Installment loans consist of things like auto loans and student loans -- money that is loaned with the expectation that it will be paid back in a relatively short period of time. Revolving loans, which are things like credit cards and bank cards, involve debt that is accrued and, ideally, paid off on a monthly basis (i.e. debt management).For the best possible credit score, it's recommended that consumers try to establish a good balance between installment and revolving loans. But here's a credit tip -- there's one other type of loan that can greatly aid your credit score for the better in the long-term: a mortgage.

When you're first approved for your mortgage, it's likely that your credit will take a hit in the near-term. But a mortgage is good for your credit score in the long run for two big reasons. One, it qualifies as a type of credit used. And two, if you make on-time mortgage payments, it will reflect well in the payment history portion of your credit score, which makes up 35 percent of your FICO score.With all this being said, it's also worth mentioning that just because you have a variety of installment, revolving and real estate loans to your name doesn't mean you'll have a pristine credit score.

Like we mentioned above, on-time payments are key. And it's also key that you don't have any unpaid loans that are taken on by collection agencies, as it's hard to repair credit when you have something that could stay on your record -- and influence it in a negative way -- for up to 7.5 years, depending on which state you are residing.So while diversifying your credit is important, it's important not to overlook other factors that go into the makeup of your overall score as well.

By Nikitas Tsoukalis