The 411 on Social Security

As published by Bank Investment Consultant:

You don’t need to retire to collect Social Security, even at age 62, but you will pay a penalty
Those who retire at 62, or before reaching full retirement age of 66 (67 for those born after 1960), pay a penalty of $1 for each $2 earned over $15,120 in 2013. For those who are reaching full retirement age of 66 this year and who start collecting Social Security will pay a $1 penalty for every $3 earned over $40,080 (these limits are raised each year for inflation). But don’t be too troubled by the penalty. The Social Security Administration, after you reach full retirement age, will adjust upward your benefit amount to reflect the extra money you earned by continuing to work while collecting early benefits, and the money that was withheld as a penalty.

Social Security income is protected by law from most creditors – but not from debts owed to the IRS, federal student loans or other federal government claimants (or from alimony or child-support payments).
This means you may want to settle federal debts using other assets before you are depending upon your Social Security benefits in retirement, but it also suggests that if you have transferred other assets, for example into a Trust for your children, you don’t have to worry about private creditors.

Social Security income is taxes at less than other income
If your taxable income is less than $25,000 or $32,000 for a couple filing jointly, you owe no income tax on your Social Security benefits. Above that amount, the taxable amount of your Social Security benefits increases with income to a maximum of 85%. However, since withdrawals from a Roth IRA don’t count as taxable income, it can be advantageous to start withdrawals from non-Roth retirement funds, holding Roth withdrawals until you start collecting benefits.

Link to Article: http://www.bankinvestmentconsultant.com/news/Social-Security-Debts-Fees-and-How-to-Avoid-Them-2683475-1.html?ET=bankic:e12984:34921a:&st=email

Biggest Social Security Misconceptions: http://www.bankinvestmentconsultant.com/video/Social-Security-Biggest-Misconceptions2683480-1.html?ET=bankic:e12984:34921a:&st=email

UGMA & UTMA Custodial Accounts for Minors by Tish Michelson

The Uniform Gifts to Minors Act (UGMA) was adopted in 1956 to provide a convenient way to make gifts of money and securities to minors. Later, it became clear that a more flexible law was desirable and the Uniform Transfer to Minors Act (UTMA) was adopted in 1986. UTMA expands the types of property that can be transferred to a minor and provides the ability to make other types of transfers besides gifts. Nearly all states have adopted UTMA, but it is up to each individual state to designate the age in which control passes to the child (generally 18 or 21).

Custodial accounts are similar in some ways to trusts. Both vehicles place property under the control of a person who is not the beneficial owner. In the case of a trust, a trustee manages the property for the benefit of the beneficiaries. In the case of a custodial account, the custodian manages the property for the benefit of the minor.

Custodial accounts are also very different from trusts. The whole point of UGMA and UTMA is to permit you to transfer property to a minor without setting up a trust. Trusts provide greater protection and more flexibility, but are more expensive, time-consuming and complicated. As a general rule, custodial accounts are a better option for smaller transfers. If you expect to transfer tens of thousands of dollars, a trust may be a better vehicle.

A transfer to a child under UTMA or UGMA requires the involvement of a custodian. This is an adult who will manage the property until the child reaches the age (dictated by state) when control passes to the child. Even though the child will not have control of the property until later, the child is the owner as soon as the property is transferred to the account. Any income earned on the account is taxed to the child.

Once you have transferred assets into a custodial account, the assets belong to the child (the beneficial owner) - you are not permitted to take them back. When the child reaches the state-specified age, the account terminates and the custodian is legally required to transfer the property to the child, who can use it any way he or she chooses.

Another difference that may affect your decision between setting up a trust or a custodial account is the number of possible beneficiaries. A custodial account may only belong to one child. It is non-transferable until the account terminates. A trust can be set up for the benefit of many beneficiaries.

Because of non-transferability and financial aid implications, it may not be the best vehicle to save for college. It also may not be the best vehicle to avoid taxes. The best use of a custodial account is in situations where you have a genuine desire to make a specific financial gift to a specific child.