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Retirement Plan Beneficiaries

October 13, 2015 by admin


When inheriting retirement assets from a parent, grandparent, or anyone who is not your spouse it’s critical to fully understand all of your options before making a costly decision that may have serious tax consequences. That’s because distribution options for non-spouse beneficiaries of IRA, 401(k), or similar qualified plans are complex and determined by several factors, including:

  • Whether or not the beneficiary is a minor*
  • If the retirement account owner died before the required beginning date (RBD) for plan distributions
  • The age of the beneficiary in relation to the age of the deceased at the time of death

Two of the most common distribution methods for non-spouse beneficiaries who are not minors are:

  • Inherited IRA – While non-spouse beneficiaries can’t roll over an inherited retirement account into their own IRA, they may be able to do a trustee-to-trustee transfer into an “inherited IRA.” Non-spouse beneficiaries have five years after the death of the account owner to take the money out. If they take the money in a lump sum by the end of the fifth year following the account owner’s death, they will pay ordinary income taxes on the entire amount.
  • Stretch IRA – The IRS also allows beneficiaries to “stretch” distributions over the course of their projected lifespan. Using this method, non-spouse beneficiaries elect to have the money paid out over their lifetimes and pay ordinary income taxes on the amount they receive each year. Stretching withdrawals over the course of a non-spouse beneficiary’s projected lifespan enables potentially decades of extra tax deferred (or in the case of Roth IRAs, tax free) growth.

However, it’s important to note that these are not your only options and tax implications can vary greatly between options. If you inherit retirement assets, be sure to check with the plan provider about your available options or contact us at (714) 634-8051 for a no-obligation consultation.


Filed Under: Orange Capital Management, Retirement Planning, Succession Planning

Why Partners Need A Buy-Sell Agreement

April 24, 2015 by admin

Some of the best businesses in the world came from the imagination of several individuals. When a group of business partners come together to make a dream into reality, the resulting partnership is going to face a lot of difficult tests over time. The mutual desire for success helps partners maintain a working relationship, but without formal agreements in place, the long-term success of the company can change in a heartbeat. One of the most important legal arrangements is a buy-sell agreement. Here are some great reasons to make sure you have one in place.

Establish Specific Terms

No relationship lasts forever. Death, divorce, disability, and retirement all pose a threat to the future of any company formed through partnership. With a buy-sell agreement, the greatest benefit is the formation of clear terms of a buyout of one or more partners in the event an individual dies, divorces a spouse with stake in the company, becomes incapacitated through illness or injury, or retires from the business. These guidelines not only set clear rules for the buyout of that individual’s stake in the company, but it also leads to the next benefit of a buy-sell agreement.

Smooth Transitions

If successful in establishing a company that will last for generations, the original partners will not be around forever. Family-owned businesses that have lasted generations likely achieved longevity with the help of a buy-sell agreement. Such an arrangement provides for smooth transitions in ownership over time. As the original partners die or retire from the company, a buy-sell agreement sets forth guidelines for the transition of power and ownership within the company.

Protect Jobs

A buy-sell agreement also helps protect the jobs of long-time employees by ensuring that the business has adequate funding upon death or other departure from the company of one or more owners. The business entity can take out insurance policies on each of the partners through a buy-sell agreement. When one or more of those individuals dies, the policies provide funding that offers liquidity to the business, protecting its day-to-day operations and safeguarding the jobs of long-time employees.

Reduce Disputes

Nasty disputes over ownership and the direction of the company in the future can be mitigated through a buy-sell agreement. The original partners can establish guidelines for the succession of control in the company, making it easier to select future leadership for the business in the event one or more partners depart from the company. It can also help minimize disputes between ownership and its employees regarding factors such as future employment, pay, and even the future of the company itself.

Avoid Running Afoul of the IRS

In order for remaining partners to easily purchase the shares of a deceased or departing owner, a valuation method needs to be in place that puts a fair price tag on the business and is respected by the IRS. There are various valuation methods, ranging from book value (net worth) and capitalization of earnings to discounted cash flow and sales-multiple valuation.

A buy-sell agreement is essential to the smooth continuation of any business formed in partnership. Your mutual desire for success does not preclude the endeavor from running into obstacles as the vision for the company’s future differs from one individual to the other. Buy-sell agreements establish acceptable guidelines for buyouts, transitions of power, and liquidity for the business when turmoil arises.


Filed Under: Orange Capital Management, Retirement Planning, Succession Planning