Meet Kari Skauge
Kari Skauge is the new kid on the block at Heartland Trust. She came onboard this quarter as our compliance officer. We are very glad to have her.
Tell us about yourself
I grew up in Hawley, Minnesota, and then attended the University of North Dakota where I earned a degree in business management. I started my career in the financial industry in 2013 and found my niche with compliance. Through our journey, my husband and I ended up building a home on the same farm where I grew up. I can honestly say, there is no place like home!
What do you like to do in your spare time?
I like to spend time with family playing pinochle and cribbage, traveling, ice fishing, snowmobiling, and skiing. My favorite chore is mowing the lawn – there is nothing more relaxing!
Understanding Gift and Estate Taxes
Adapted from Broadridge Investor Communication Services
If you give away money or property during your life, those transfers may be subject to federal gift and estate tax and perhaps state gift tax. The money and property you own when you die (i.e., your estate) may also be subject to federal gift and estate tax and some form of the state death tax. These property transfers may also be subject to generation-skipping transfer taxes. You should understand all of these taxes, especially since the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (the 2001 Tax Act), the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Act), the American Taxpayer Relief Act of 2012 (the 2012 Tax Act), and the Tax Cuts and Jobs Act. The recent Tax Acts contain several changes that make estate planning much easier.
Background on federal gift and estate tax
Under pre-2001 Tax Act law, no federal gift and estate tax was imposed on the first $675,000 of combined transfers (those made during life and those made at death). The tax rate tables were unified into one — that is, the same rates applied to gifts made and property owned by persons who died in 2001. Like income tax rates, gift and estate tax rates were graduated. Under this unified system, the recipient of a lifetime gift received a carryover basis in the property received, while the recipient of a bequest, or gift made at death, got a step-up in basis (usually fair market value on the date of death of the person who made the bequest or gift).
The 2001 Tax Act, the 2010 Tax Act, the 2012 Tax Act, and the Tax Cuts and Jobs Act substantially changed this tax regime.
Spring is a wonderful time of year.
Snow melts, flowers bloom, docks, and boats are placed in the water. This is the time of year when we see the cold bareness of winter transition into the long warm days of summer. With the season come key moments that signal the end of winter: tax season, golf course openings, trees budding.
For all of us, spring confirms that winter doesn’t last forever. As dreary March stretches into light-filled May, we find new hope, new growth. We receive this confirmation when we have to buy our kids new soccer shoes, or suffer aches and pains from hitting golf balls, or see farmers in the fields.
After the year we’ve been through, it is comforting to recognize the growth process is alive and well. No matter how cold the winter is, spring comes. This time of year, that’s confirmation of new opportunities and growth for us all.
Planning for Physicians: Managing Contributions Between a 401(k), 457(b)
As many of our readers likely know, the Federal government provides strong incentives for saving for retirement and other financial goals. You can break these down into three broad categories: tax deductibility (on contributions), tax-free distributions (i.e. withdrawals), and tax deferral (on growth). Many physicians can increase their tax deductions and benefit from tax deferral by contributing to both a 401(k) plan and a 457(b) plan.
401(k) and 457(b) plans are both employer-sponsored retirement plans. The main difference is 457(b) plans can only be sponsored by certain entities, namely state and local governments, along with nonprofits such as hospitals, charities, and unions.
Retirement Plan Restatement
Every six years the Internal Revenue Service (IRS) requires certain qualified retirement plans to be fully amended and restated to comply with law changes. The Cycle 3 Defined Contribution (DC) Plan Restatement period began on August 1, 2020, and plan sponsors of defined contributions plans (401(k), profit-sharing, and money purchase pension plans) will have until July 31, 2022, to comply. Plans that do not restate their plan document by this date will be subject to IRS-imposed penalties, which, in extreme cases, could jeopardize the plan’s tax-qualified status.
So why is this important? Plan documents are the framework that an individual retirement plan must follow. They are drafted based on laws and regulations set forth by three federal regulators: Congress, the Treasury Department (IRS), and the Department of Labor (DOL). The IRS is the main overseer, and it has the ability to “pre-approve” plan documents.
Meet Naomi Schempp
Naomi is a native of Garrison, North Dakota, and she has called Fargo home since 2002. She works on the trust side of HTC and has been a welcome addition to our team.
Tell us about yourself.
I received both an associate of science and an associate of arts degree from Williston State College. I continued my education and received a bachelor of arts degree in communications from North Dakota State University. Go Bison!
Wills: The Cornerstone of Your Estate Plan
Adapted from Broadridge Investor Communication Services
If you care about what happens to your money, home, and other property after you die, you need to do some estate planning. There are many tools you can use to achieve your estate planning goals, but a will is probably the most vital. Even if you are young or your estate is modest, you should always have a legally valid and up-to-date will. This is especially important if you have minor children because, in many states, your will is the only legal way you can name a guardian for them. Although a will does not have to be drafted by an attorney to be valid, seeking an attorney’s help can ensure that your will accomplishes what you intend.
We have all been confronted with challenges over the past 10 months.
Whether we needed to find a new way to complete a familiar task or wrestled internally with some difficult questions, this pandemic has affected all aspects of our lives.
In response, we’ve had little choice but to move onward.
While finding a way forward can be uncomfortable, it’s actually a good thing. Challenges promote growth. When we face obstacles, we learn how to be more efficient and prioritize what’s important to us. We’re forced to recognize and cherish the small things in life.
As we turn the page to a new year, I celebrate the ways the team at Heartland Trust has moved forward with confidence and purpose. I’m proud of everything we’ve accomplished professionally and personally in a year where nothing was expected. Even as the world changed around us, we hung on to the values that mean so much to us and you.
I’m proud of the challenges we’ve faced and look forward to seeing how we continue to grow. Onward!
IRS Updated Life Expectancy Tables
With many other things going on in November, it was easy to miss when the IRS issued new life expectancy tables. This is important because these tables are used to calculate Required Minimum Distributions (RMDs) from IRAs and qualified retirement plans.
The old tables will still be used when determining 2021 RMDs, but as of January 1, 2022, the new tables become effective.
This change has been long overdue. The current life expectancy tables were last updated in 2002. The new tables better reflect the improved life expectancy of individuals. These changes will generally reduce the amounts required to satisfy RMDs, meaning account owners can retain a larger amount in their retirement accounts and defer taxes longer. Coupled with the fact that the RMD age was lifted to 72 in 2020 and no RMDs were required in 2020, there is potential to keep more money sheltered in tax-advantaged accounts.
Retirement Plan Limits for 2021
The Internal Revenue Service (IRS) has set inflation-adjusted limits for IRAs and company-sponsored retirement plans for 2021. While some of the contribution limits have remained the same, other limits important to determining the amount you can save have changed.
The basic salary contribution limit for a 401(k) and similar company-sponsored retirement plans remains the same at $19,500; and the catch-up contribution for those who are 50 years of age or better, also remained the same at $6,500. However, the overall annual additions limit for these types of plans goes up from $57,000 to $58,000 in 2021.
The table below provides additional information regarding the 2021 contribution limits for retirement accounts as well as prior limits for the past five years. It is for informational purposes only.