Jeffrey D. Melagrano, C.P.A., P.C.



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This section of our web site is intended to be informative, and address issues and planning ideas. You can email us if you have a particular area of tax planning or accounting which you would like to read about and we will do our best to include in our updates or, simply call our office. If you email us, please include your name, address and telephone number.

Benefits of a Roth IRA

Roth IRAs are tax-favored accounts to which qualified taxpayers can make after-tax contributions. Contributions to the account can grow tax-free, and neither the contributions nor the earnings on them are subject to tax when a Roth IRA owner receives a qualified distribution from the account. Although a Roth IRA is designed to help a taxpayer save for retirement, it is inaccurate to characterize a Roth IRA as just a retirement savings vehicle. A Roth IRA can offer tax, estate planning, and financial planning advantages that are not available with respect to a traditional IRA.

Family Tax Planning: Maximizing the Use of Education Tax Credits and Other Education Tax Incentives

To help families (largely low- and middle-income) and students pay for the costs of post-secondary education, the tax law provides a number of tax benefits for education, including the Hope scholarship credit, the lifetime-learning credit, two forms of tax-favored savings accounts, a deduction for tuition, and a deduction for student loan interest. There are, however, limitations and restrictions on using all of these benefits. As a result, it's important to consider strategies that maximize a taxpayer's use of all the benefits available.

Revocable Living Trusts 

The primary reasons to consider using a revocable living trust have to do with ease of administration, rather than tax planning. Perhaps the most important reason to consider a revocable living trust is to avoid probate. The property held in the trust will pass at the grantor's death free of any state probate restrictions unless the trust estate is to be distributed to the personal representative of the probate estate. Other advantages are that:

1. The trust can be amended or supplemented without the formalities associated with the proper execution of a will.

2. The trust can become irrevocable upon the grantor's incapacity or incompetency, but become revocable upon the recovery of the grantor, and, depending upon the composition of the assets in the trust, allow the avoidance of guardianship proceedings.

3. The trust can be used to segregate assets for many purposes such as second marriages where prenuptial assets can be held in the event of a subsequent divorce.

4. There may be some creditor protection for the assets held in the trust, if the grantor is given only a technical retained power, not the power to revoke.

The grantor is considered to own the assets and is taxed on any income (and entitled to any deductions) as though the trust does not exist. The existence of the trust also has no effect for transfer tax purposes.  The transfer to the trust is not a gift for gift tax purposes. The property included in the trust is included in the estate. Revocable living trusts generally make sense only if they make sense from a non-tax perspective.