Understanding the nuances of income and estate tax laws may help avoid costly consequences later
ATLANTA, May 15, 2014 /CNW/ - For those approaching retirement age, it's crucial to understand the effects of income and estate tax laws and begin planning well in advance to ensure a comfortable retirement and pass along assets to loved ones, according to the experts at Atlantic Trust, the U.S. private wealth management division of CIBC (NYSE: CM) (TSX: CM).
While individual "wants" in estate-planning may seem simple, a number of complicating factors add layers of complexity to the planning process. Income and estate taxes (both of which may change over time) can eat away up to 65 per cent of a family's retirement benefits inheritance, while questions about the order in which to spend your taxable and tax-deferred assets and who to designate as beneficiaries have their own short- and long-term implications.
To navigate through all of these options and their potential issues, Atlantic Trust recommends meeting with an advisor early on to develop an integrated approach toward making withdrawal decisions and estate planning. It's also important to revisit that plan regularly to factor in life events, such as the birth of grandchildren.
"We want to start painting the picture of what the assets and the cash flow will look like over time, including how it will look subject to income and estate taxes," says Art Graper, managing director and senior wealth strategist for Atlantic Trust. "That's why it's important to get the total picture on assets and the asset mix, your health, the family and its dynamics, your desired lifestyle years down the road and cash flow needs, as well as gifting plans and any philanthropic intentions."
As a very general rule of thumb, Atlantic Trust recommends spending taxable assets first. However, there are always exceptions. For example, if you have a very large individual retirement account (IRA) or tax-deferred account, it could be advantageous to withdraw from that IRA first before reaching the RMD threshold, especially if you think tax rates will rise in the future or you are concerned about estate taxes, Atlantic Trust says.
Just as important as deciding how to spend your assets is selecting who inherits them after you die. In general, beneficiaries are better off if they can stretch out the period they receive distributions from retirement accounts. Because an IRA inheritor can take withdrawals based on his or her life expectancy, the younger the beneficiary, the longer the stretch-out and deferral of income tax
"No matter what your retirement and legacy goals are, having an in-depth discussion with a trusted financial advisor is the first step in protecting your assets and passing them on to future generations," says Graper.
About Atlantic Trust
Atlantic Trust is one of the nation's leading private wealth management firms, offering integrated wealth management for high-net-worth individuals, families, foundations and endowments. The firm considers clients' financial, trust, estate planning and philanthropic needs in developing customized asset allocation and investment management solutions. Experienced professionals deliver a broad range of solutions, including proprietary investment offerings and a robust open architecture platform of traditional and alternative managers. Atlantic Trust operates in 12 full-service locations throughout the U.S. with $24.0 billion in assets under management (as of December 31, 2013). For more information, visit www.atlantictrust.com.
CIBC is a leading Canadian-based global financial institution. Through our Retail and Business Banking, Wealth Management and Wholesale Banking businesses, CIBC provides a full range of financial products to individual, small business, commercial, corporate and institutional clients in Canada and around the world.
CIBC Wealth Management provides relationship-based advisory services and an extensive suite of leading investment solutions to meet the needs of personal, institutional and high-net-worth clients through an extensive distribution network, that includes CIBC Private Wealth Management, CIBC Wood Gundy and CIBC Investor's Edge. Our asset management, retail brokerage and private wealth management businesses combine to create an integrated offer, delivered through nearly 1,500 advisors across Canada. In addition, CIBC Asset Management provides global money manager services to institutional and high-net-worth clients and industry-leading retail investment solutions through our two mutual fund families - CIBC and Renaissance - and the CIBC family of managed portfolio solutions.
SOURCE: Atlantic Trust Private Wealth Management
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Media inquiries: Caroline Van Hasselt, Director, CIBC External Communications and Media Relations, (416) 784-6699, firstname.lastname@example.org or Carolyn Donnelly, Atlantic Trust Director of Marketing, (404) 881-3417, email@example.com.