Do You Know Why 2020 Is A Critical Year For Tax Planning?

Contributed by: Nick Defenthaler, CFP®, RICP®

It’s been quite the year, hasn’t it? 2020 has certainly kicked off the decade in an interesting fashion. In addition to the coronavirus quarantine, it’s also a year that required a significant amount of tax planning and forward-thinking. Why is this year so unique as it relates to taxes? Great question, let's dive in!

SECURE Act

The SECURE ACT was passed in late December 2019 and became effective in 2020. The most meaningful part of the SECURE Act was the elimination of the stretch IRA provision for most non-spouse IRA beneficiaries. Non-spouse beneficiaries now only have a 10-year window to deplete the account which will likely result in the beneficiary being thrust into a higher tax bracket. This update has made many retirees re-think their distribution planning strategy as well as reconsider who they are naming as beneficiaries on certain accounts, given the beneficiary’s current and future tax bracket. Click HERE to read more about this change. 

CARES Act 

Fast forward to March, the CARES Act was passed. This critical stimulus bill provided direct payments to most Americans, extended and increased unemployment benefits, and outlined the parameters for the Paycheck Protection Program for small business relief. Also, another important aspect of the CARES Act was the suspension of Required Minimum Distributions (RMDs) for 2020. This isn’t the first time this has occurred. Back in 2009, RMDs were suspended to provide relief for retirees given the “Great Recession” and financial crisis. However, the reality is that for most Americans who are over 70 1/2 and subject to RMDs (RMDs now begin at age 72 starting in 2020 due to the SECURE Act), actually need the distributions for cash flow purposes. That said, for those retirees who have other income sources (ex. Social Security, large pensions, etc.) and investment accounts to cover cash flow and don’t necessarily “need” their RMD for the year for cash flow, 2020 presents a unique planning opportunity. Not having the RMD from your IRA or 401k flow through to your tax return as income could reduce your overall income tax bracket and also lower your future Medicare premiums (Part B & D premiums are based on your Modified Adjusted Gross Income). We have seen plenty of cases, however, that still make the case for the client to take their RMD or at least a portion of it given their current and projected future tax bracket. There is certainly no “one size fits all” approach with this one and coordination with your financial planner and tax professional is ideal to ensure the best strategy is employed for you. 

Lower Income In 2020

Income for many Americans is lower this year for a myriad of reasons. For those clients still working, it could be due to a pay cut, furlough, or layoff. Unfortunately, we have received several dozen calls and e-mails from clients informing us that they have been affected by one of the aforementioned events. In anomaly years where income is much less than the norm, it presents an opportunity to accelerate income (typically though IRA distributions, Roth IRA conversions, or capital gain harvesting). Every situation is unique so you should chat with your planner about these strategies if you have unfortunately seen a meaningful reduction in pay. 

Thankfully, the market has seen an incredible recovery since mid-March and most diversified portfolios are very close to their January 1st starting balances. However, income generated in after-tax investment accounts through dividends and interest are down a bit given dividend cuts by large corporations and because of our historically low interest rate environment. We were also were very proactive in March and April with a strategy known as tax-loss harvesting, so your capital gain exposure may be muted this year. Many folks will even have losses to carry over into 2021 and beyond which can help offset other forms of income. For these reasons, accelerating income could also be something to consider. 

Higher Tax Rates In 2021, A Very Possible Scenario 

Given current polling numbers, a Democratic sweep seems like a plausible outcome. If this occurs, many analysts are predicting that current, historically low rates could expire effective January 1, 2021. We obviously won’t know how this plays out until November, but if tax rates are expected to see a meaningful increase from where there are now, accelerating income should be explored. Converting money from a Traditional IRA to a Roth IRA or moving funds from a pre-tax, Traditional IRA to an after-tax investment account (assuming you are over the age of 59 1/2 to avoid a 10% early withdrawal penalty) eliminates the future uncertainty of the taxes on those dollars converted or distributed. Ever since the Tax Cuts and Jobs Act was passed in late 2017 and went into law in 2018, we have been taking a close look at these strategies for clients as the low tax rates are set to expire on January 1, 2026. However, if taxes have a very real chance of going back to higher levels as soon as 2021, a more aggressive income acceleration plan could be prudent. 

As you can see, there have been many moving parts and items to consider related to tax planning for 2020. While we spend a great deal of our time managing the investments within your portfolio, our team is also looking at how all of these new laws and ever-changing tax landscape can impact your wealth as well. In our opinion, good tax planning doesn’t mean getting your current year’s tax liability as low as humanly possible. It’s about looking at many different aspects of your plan, including your current income, philanthropy goals, future income, and tax considerations as well as considering the individuals or organizations that will one day inherit your wealth and helping you pay the least amount of tax over your entire lifetime.

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

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All investments are subject to risk. There is no assurance that any investment strategy will be successful. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

3 Types Of Practical Disability Coverage You Should Know

Contributed by: Josh Bitel, CFP®

According to the Social Security Administration, studies have shown that just over 25% of today’s 20 year-olds will become disabled at some point before reaching age 67. Wow! This is a pretty staggering statistic – these odds are far greater than a premature death, which is what life insurance is typically purchased to protect against. However, often when we discuss disability insurance with clients, we find that it’s an area of confusion. Many aren’t even sure if they have coverage or they may believe that Social Security will kick in and be enough. For most of us, especially if you’re in the early stages of the “accumulation mode” of your career, your earnings power is most likely your largest asset both now and into the foreseeable future. A disability can wreak havoc on this “asset” which is essentially why disability insurance is purchased. Let’s look at the basic types of coverage:

1. Short-Term Vs. Long-Term Disability

Long-term disability typically has what’s known as an “elimination period” of how many days must pass before benefits begin. This is often called the “time deductible” of the policy which in many cases is 90-120 days. Benefits can payout up until age 65, however, most policies have a stated period of time where benefits would be payable. To help bridge this gap of coverage, a short-term disability policy can come in handy because benefits will usually begin within a week or two of disability and continue for up to one year, although benefits typically last between three to six months. Short-term disability policies can be a great tool to preserve your emergency cash fund, typically at a somewhat reasonable cost. 

2. Group Coverage

As with life insurance, many employers offer a form of disability insurance to their employees as part of their benefits package. Sometimes the employer will pay for the premium in full and other times the employee will have the option to pay for premiums (fully or partially). You may be asking yourself, “Why would an employee want to pay for the group coverage instead of having the employer foot the bill?” Great question, with very important ramifications! If the employer pays your premiums in full, the entire amount of your benefit if needed (typically between 50% and 60% of your pay up to certain limits) would be taxable. If you as the employee were paying for the premiums in full and you needed the coverage, benefits paid out would NOT be taxable. If you were only paying a portion of the total premium, say 20%, only 20% of the benefits paid would be non-taxable to you as the employee. The tax treatment of benefits will have a large impact on the net amount of benefit that hits your bank account so it’s important to understand who’s paying for what if you have access to a group disability policy at work.

3. Individual Coverage

As the name implies, individual coverage is purchased by you through an insurance company – the policy is not offered through your employer. A major benefit of purchasing an individual policy is that the coverage is portable, meaning you can take it with you if you change jobs because it’s not tied to your company’s benefits package (most group policies are non-portable). Another advantage (or disadvantage depending on how you look at it), is that you are paying for the coverage in full so if benefits are needed, they will not be taxable to you. With an individual policy, you have control over selecting the definition of disability that your policy uses (any occupation, own occupation, etc.) and you’d also have the option to add any additional features to the policy, usually at an additional cost.

In this blog, we’ve merely scratched the surface on disability coverage. As I mentioned, it is often one of the most overlooked parts of a client’s financial plan and coverage types, despite its high probability and significant risk of long-term financial loss. At a minimum, check with your employer to see if group coverage is offered (both long-term and short-term) and consult with your financial planner on whether or not it is sufficient or if additional coverage would be recommended. 

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James.

The Importance Of A QDRO In A Divorce

Contributed by: Jacki Roessler, CDFA®

It’s the end of an arduous divorce process. You and your spouse have agreed on parenting time, spousal support, and what to do with the house. It hasn’t been easy. You’re more than ready to sign the Judgment of Divorce and move on to the next phase of your life. 

As you’re signing all the documents, your attorney mentions that you need a QDRO and you should get it done sooner rather than later. You put it off. You’re not exactly sure what a QDRO is and you’re overwhelmed with helping your family adjust to its new normal.

To say this is a big mistake is a big understatement. Getting the QDRO (short for Qualified Domestic Relations Order) done needs to be at the top of every divorced spouse’s “Do it Now!” list. The longer the wait, the more the settlement is at risk because there’s a much greater chance something could go wrong. 

First things first, what is a QDRO and what is the harm in waiting? 

A QDRO is a legal document used to divide a qualified employer-sponsored retirement plan (i.e a 401(k), 403 (b), pension, etc…) under a divorce. Based on the federal law ERISA (Employee Retirement Income Security Act), the only way to divide a 401k type plan is with a QDRO. The Judgment of Divorce can’t be used for that purpose unless the terms of the QDRO are embedded in it. Furthermore, the only one with authority over “qualifying” a QDRO is the plan administrator. ERISA grants them ultimate decision-making authority. 

What can go wrong if there is a delay?

Where to begin? One common issue occurs when a 401(k) account owner takes a distribution, loan, or rollover before the QDRO is entered, thereby reducing or even eliminating the former spouse’s access to their share.

For example, John and Samantha divorced in 2019. Samantha was awarded 50% of John’s 401k account with Acme Widgets. She waited two years to retain an expert to prepare her QDRO. In the meantime, as a result of being laid off, John took a CARES Act distribution that liquidated his entire 401(k). Remember, the Judgment of Divorce is only binding on the parties; it’s not binding on third parties like insurance carriers, credit card companies, or plan administrators. Without a QDRO in place, Samantha didn’t have any legal right to the money in John’s 401(k) so the plan let him do what he wanted with it.

Now let’s suppose that Samantha only waited 3 months to get the QDRO prepared. John’s employer changed custodians and the new custodian no longer had a record of his account balance on the date of divorce. Surprisingly, account custodians aren’t required to maintain any historical records. In this case, the QDRO is rejected and the parties are left to negotiate what happens next.

Of course, no one wants to hire an attorney again and hash out a QDRO issue in front of the judge. Imagine how much worse it would be if someone has to take their ex-spouse’s estate to Court.

Consider the case of Mike and Carrie. Mike was to receive 50% of Carrie’s pension with General Motors. The QDRO wasn’t entered and Carrie died unexpectedly in an accident. Of course, her new spouse was named beneficiary and he was the one that began receiving survivor benefits on the pension. Mike wrote a letter to the plan and gave them a copy of his Judgment of Divorce which stated he was supposed to be the beneficiary. The Plan responded by telling him to get an attorney; they weren’t bound by the Judgment of Divorce. 

These are only a few of the many things that can go wrong when the parties wait to enter the QDRO. Once they leave the courthouse and they don’t have a QDRO in place, it’s almost as if a time bomb waiting to go off is hanging over their head. It’s possible nothing could go wrong, but if it does it could be disastrous. If you need a QDRO, make sure that it's at the top of your priority list. 

Jacki Roessler, CDFA®, is a Divorce Planner at Center for Financial Planning, Inc.® and Branch Associate, Raymond James Financial Services. With more than 25 years of experience in the field, she is a recognized leader in the area of Divorce Financial Planning.

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Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal advice matters with the appropriate professional.

Is Now The Time To Refinance Your Mortgage?

Contributed by: Kali Hassinger, CFP®, CDFA®

Long-term interest rates and thus mortgage rates have hit historical lows this month. This has been a continuing trend with mortgage interest rates hitting historical lows eight times in the last five months. This is partially due to the Fed’s aggressive purchasing of mortgage-backed securities since March.  

If you’re like many, you may be wondering if this is the right time to refinance. Although there are many benefits to refinancing, it’s important to be sure it’s appropriate given your current situation.

Here are some items to consider if you’re thinking of taking advantage of these once again, historically low mortgage rates:

• How long do you plan on staying in your home? There is a cost to refinancing. To justify the fees, you should be planning to stay in your home for at least another two to three years.

• What is more important to you: lowering your monthly payment or lowering the amount you pay over the life of the loan? Reducing the term of the loan, even if it means the payment will slightly increase, can significantly reduce the total interest paid!

• If you have an outstanding second mortgage or home equity line of credit, consider combining them into one loan with a fixed interest rate.

• If you have an adjustable-rate mortgage (ARM), now is a great time to move to a fixed rate to avoid payment fluctuations in the future.

• Consider a modest cash-out refinance to pay down high interest rate loans or debt.   

As with any major financial decision, such as a refinancing or a new home purchase, we encourage all of our clients to reach out to us before making a final decision. Please don’t hesitate to reach out if you’d like to talk through your options and see if changing your mortgage rate or term aligns with your overall financial plan and goals.

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

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Raymond James Financial Services and your Raymond James Financial Advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.

Were You In The Right Portfolio?

Contributed by: Nicholas Boguth

Talk about volatility…within 6 months, the S&P 500 hit an all-time high, fell over 33%, then climbed over 38%! As I write this*, we are almost back to an all-time high in the stock market.

I recently wrote about asset allocation as the single biggest decision you will make in your investing lifetime. There are many QUANTITATIVE factors that should go into your asset allocation such as your financial goals, time horizon, savings rate, liquidity needs, and return expectations (just to name a few), but there is a QUALITATIVE factor that stands out among the rest: how you feel about your portfolio.

Market crashes such as the one we experienced in March offer unique opportunities to reevaluate our portfolios; specifically the aforementioned “feeling”.  When the stock market fell 10%, then 20%, then 30%...how did you feel? Were you frantically watching the news worried about your financial future or comfortable in your recliner watching your favorite Netflix series? Were you checking your statements daily with rising blood pressure or confident in your advisor and financial plan?

Which asset allocation are you in? Mostly stocks, mostly bonds, or somewhere in between? Back in March, that single decision would have altered your stock market experience more than anything else, and it will continue to drive your experience going forward. If you are not confident in (or unsure of) your asset allocation, we’d love to help.

*Indexes above represented by: Bond – BbgBarc US Agg Bond TR, and Stock – S&P 500 TR. Return data as of 7/20/2020.

Nicholas Boguth is a Portfolio Administrator at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.

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You cannot invest directly in any index. Pass performance doesn’t guarantee future results. Investing involves risk regardless of the strategy selected, including asset allocation and diversification. The S&P 500 is an unmanaged index of 500 widely held stocks that’s generally considered representative of the U.S. stock market. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US-dollar denominated, fixed-rate taxable bond market.

Do I Need Life Insurance? How Much?

Contributed by: Josh Bitel, CFP®

Given the pandemic among other unfortunate news around the world, there has been an increased interest about life insurance quite a bit recently. There are many different ways to determine if, and how much, is needed. 

As your life changes, so do your needs for life insurance. You may not need it when you are young and single. However, as you take on more responsibility and your family grows, your life insurance needs may grow as well. Below are a few rules of thumb I like to use to start the conversation.

Estimating Your Life Insurance Need

There are several methods that you can use to estimate your life insurance needs. While the actual calculation may be much more involved, these tricks can be used as somewhat of a starting point when having a conversation with an insurance professional.

Income Rule

My favorite rule of thumb is the income rule, which states that your insurance coverage should be equal to 7-10 times your gross annual income. (Other professionals may have other ranges, I like 7-10). For example, a person earning a gross annual income of $60,000 should have between $420,000 (7 x $60,000) and $600,000 (10 x $60,000) in life insurance coverage.

Income Plus Expenses

This rule considers your insurance needs to be equal to 5x your gross annual income plus the total of any mortgage, personal debt, final expenses, and special funding needs (college, charities, etc.). For example, assume that you earn a gross annual income of $60,000 and have expenses that total $250,000. Your insurance need would be equal to $550,000 ($60,000 x 5 + $250,000).

Family Needs Approach

The family needs approach asks you to purchase enough life insurance to allow your family to meet its various expenses in the event of your untimely death. Under the family needs approach, you divide your needs into three categories:

• Immediate needs at death (cash needed for funeral and other expenses) 

• Ongoing needs (income needed to maintain your family's lifestyle, such as a mortgage payment) 

• Special funding needs (college funding, bequests to charity and children, etc.) 

Once you determine the total amount of your family's needs, you purchase enough life insurance, also important is taking into consideration the possible accumulating of interest in your life insurance policy over a given time frame. 

These calculations will merely scratch the surface on determining your proper amount of coverage. Several other factors, such as your line of work, size of family, post-mortem desires, among other things, may trump any of the other rules listed above. For this reason, your best bet is to have a conversation with an insurance professional to understand your own unique needs.

Josh Bitel is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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These policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. There are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company. The hypothetical examples presented are for illustration purposes only. Actual investor results will vary. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

HEROES CAMPAIGN: “HAVEN”

Contributed by: Center for Financial Planning, Inc.®

The Center’s Hero Campaign aims to spotlight local nonprofits amid the COVID-19 outbreak. Our goal is to raise awareness and support the community. This is our 4th post in the Q+A series featuring HAVEN. 

What is your nonprofit?

HAVEN is the only agency in Oakland County that provides comprehensive services to survivors of domestic violence and sexual assault. Our mission is to empower survivors, spread awareness, and prevent violence. We provide services through an innovative model that fully integrates our residential, counseling, advocacy, and educational programs under one roof. Each year, HAVEN serves about 30,000 people through a wide range of empowerment-based programs and services.

Who do you serve? 

HAVEN provides free services to survivors and their children. Although HAVEN is located within Oakland County, our services are available to survivors no matter their current residency. Approximately 35% of our residents come from Detroit.

How have the communities you serve been impacted by COVID-19? 

COVID-19 has greatly increased the lethality for many survivors. Due to the Stay Home, Stay Safe order, many survivors have been forced to quarantine with their abusers. We haven’t experienced a decrease in calls, which signifies that the survivors in our community are still in need of the critical and necessary services that we provide.

How has your nonprofit been impacted by COVID-19?

Like most organizations, HAVEN has been impacted, but the dedication of our staff and the outpouring community support has been beneficial. The majority of our staff is working remotely. Some are still meeting with clients in-person while following social distancing guidelines. We’ve transitioned many of our programs to telehealth, via phone or video conference.

What can people and businesses do to support your organization and nonprofits generally during this unique environment?

During this time community supporters can donate monetarily directly on our website. Critical need items are needed as well, such as cleaning products, masks, sanitizing wipes, hand sanitizer, Kleenex or items from our General Wish-List.

Read more blogs in this series:

1. Beyond Basics

2. MOTCC

3. Focus: HOPE

COVID-19 and Your Money: Know These 4 Easy Financial Tips

Contributed by: Sandra Adams, CFP®

The coronavirus pandemic has taken us by storm. The virus has been devastating both financially and psychologically for many across the world. It has changed the way we will likely live our lives forever and forced us to slow down and think about things differently. Here are the top financial lessons that COVID-19 has helped us to see a little clearer...lessons that may be worth holding onto even after the pandemic is behind us.

1. Stick To A Budget

   It is easy for budgeting to take a backseat when times are good. We may find ourselves spending money on unnecessary items because we aren’t paying attention. The pandemic forced many to take a hard look at their expenses due to loss of income and free time. Many cut back on those “extras” they didn’t need, didn’t want, or weren’t using. They found ways to be more frugal without impacting the quality of life. Also a major plus: family time at home didn’t cost anything.

2. Have An Emergency Reserve Fund

   As in any financial crisis or economic slowdown, having emergency reserves can save you if hours are cut or a job is lost. While you can collect unemployment, there is often a gap in it getting paid out. Having emergency reserves, enough to get you through several months’ worth of expenses can be a lifesaver in these situations. The truth is, the majority of the U.S. population does not have this. If you do not have an emergency reserve fund…make this your goal before the next crisis!

3. Update Your Estate Plan

   People of all ages suddenly realized it might not be too soon to make sure their estate planning documents are in order. Durable Powers of Attorney and Wills (and potentially a Trust if applicable) used to put off most younger folks until they started to have families or until they felt like they had accumulated “enough” in assets. The sudden threat of a virus that could take your life at any age suddenly made these documents more important. Even more so with anyone over the age of 18 needs to have their Durable Powers of Attorney as their parents are no longer able to make legal, financial, or medical decisions on their behalf. Many COVID-19 patients were taken to facilities alone and not allowed to have a family member accompany them.

4. Get Life Insurance

   The pandemic caused a surge of folks to wonder if they were sufficiently covered from a life insurance standpoint. Many were younger families who had not yet accumulated sufficient assets to support their spouses and children long-term. While less common, COVID-19 deaths have appeared in the young adult group. If those families did not have sufficient life insurance, their surviving members were left in a devastating financial situation. It’s extremely important to make sure one always has sufficient life insurance coverage until they have the time to accumulate assets to support their families later in life. More young folks need to get life insurance; middle-age clients need it if asset accumulation is behind schedule. 

While COVID-19 has greatly impacted our lives, we can certainly learn from it. Consider implementing these 4 lessons. We are certain to learn more lessons from COVID-19, but this is a good place to start!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

HEROES CAMPAIGN: "MOTCC"

Contributed by: Center for Financial Planning, Inc.®

The Center’s Hero Campaign aims to spotlight local nonprofits amid the COVID-19 outbreak. Our goal is to raise awareness and support the community. This is our 3rd post in the Q+A series featuring the Michigan Opera Theatre Children’s Chorus (MOTCC).

What is your nonprofit?

Michigan Opera Theatre Children’s Chorus (MOTCC) is a world-class training program that provides exceptional choral music and theatrical performance instruction in a professional environment to young people. Each season, MOTCC produces two major performances on the Detroit Opera House stage: A Winter Fantasy, the annual December showcase concert, and a full-scale opera in the spring, which is performed solely by the children’s chorus. Frequently, opportunities arise for choristers to perform with the Michigan Opera Theatre (MOT) mainstage international singers, directors, and conductors too. Many of our MOTCC alumni have gone on to prestigious conservatories and universities majoring in vocal performance or musical theater. Some have already established distinguished careers in music. 

Who do you serve? 

MOTCC offers this unique training program to 80 boys and girls with unchanged voices ages 8-16 years old from the five southeast Michigan counties, as well as Windsor, Ontario. Through our concerts and opera performances, we serve audiences of all ages throughout lower Michigan. MOTCC opera has become an annual tradition and a popular field trip for teachers wishing to introduce children to opera and live theater. What makes this experience even more significant is that all the lead roles and chorus are sung by children. Each show attracts more than 2,000 students not only from southeast Michigan but many other cities within a 100-mile radius. 

How have the communities you serve been impacted by COVID-19? 

In mid-March 2020, all rehearsals and performances of the children’s chorus had to abruptly halt due to COVID-19. This meant that not only were the individual MOTCC members impacted by the cancellation, but also the audience members who were to attend our opera The Very Last Green Thing. MOTCC received grants for tickets and buses for under-served students to attend the children’s opera free of charge. The cancellation resulted in a missed opportunity for those children. 

How has your nonprofit been impacted by COVID-19? 

Due to forced closure and social distancing, MOTCC created a 30-minute virtual opera performance of The Very Last Green Thing and presented it on MOT’s and MOTCC’s Facebook pages and websites. This project gave our choristers an opportunity to use the musical training they gained through MOTCC and the ability to express themselves artistically in a different medium. Since it was a free performance, we were not able to make up lost revenue that we would have earned in a live performance. Additionally, we had to issue refunds to our ticket holders for the canceled staged version. Currently, we are unable to announce auditions, rehearsal schedules, or commit to any production for next season due to government guidelines for public health.

What can people and businesses do to support your organization and nonprofits generally during this unique environment?

Making a donation will help MOTCC’s ability to continue to offer our music education program. With social distancing and in consideration that singers are potentially “super spreaders” of COVID-19, MOTCC may not be able to offer in-person training unless precautions through government guidelines are met. Many of these guidelines will require additional funding to provide a safe environment for our singers and staff. If we cannot have in-person contact, we will need to adapt this program for digital student engagement and distribution. The curriculum will include more individual musical instruction from our directors, conductors, and voice and dramatic instructors and require more online platforms. Your donations will subsidize the cost of this adapted program to fit government requirements for safe program delivery and keep the cost of the tuition affordable. It also supports our scholarship fund and removes the barrier for low-income families so their children may participate with full-tuition scholarships. 

MOTCC’s goals are to provide unique educational opportunities that:

• Create high-quality opera and cultural arts experiences that are accessible, affordable, and engaging for schoolchildren

• Tap the children’s creativity and imagination

• Inspire the next generation of artists, and opera and cultural arts audiences.

We appreciate all your support in helping us reach our goals!

Click to view the virtual performance of The Very Last Green Thing

Read more blogs in this series:

1. Focus: HOPE

2. Beyond Basics

3. HAVEN

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The Michigan Opera Theater Children's Chorus (MOTCC) is not affiliated with or endorsed by Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

What You Need to Know About the RMDs Deadline Extension

Contributed by: Robert Ingram, CFP®

To combat the economic impact of COVID-19, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020.  The more than 2 trillion dollar stimulus package contained numerous provisions including an expansion of unemployment benefits, tax credit direct payments to qualified individuals, financial support to small businesses/healthcare facilities/state and local governments, and some changes to retirement account rules.  One of the provisions affecting retirement accounts was to suspend Required Minimum Distributions (RMDs) for 2020.  Individuals subject to RMDs for qualified retirement plans such as 401(k), 403(b) and IRA accounts are not required to take distributions this year (including beneficiaries owning inherited IRAs who were still subject to annual RMDs).

What does this suspension of RMDs mean for individuals who have already taken distributions prior to the CARES Act, but would not have if given the choice? If you have taken a distribution before March 27 is there a way to reverse or ‘undo’ the distribution?

Expanding The 60-Day Rollover Window For 2020

A retirement account owner that takes possession of a distribution from the account has 60 days from the date of withdrawal to complete a rollover into another eligible retirement account, for example, a rollover to an IRA.  Doing so excludes the distribution from income that could be subject to taxes and penalties.  This is referred to as the 60-day rollover rule; the IRS allows this one time per 12-month period. Please note that the one time per year rule does NOT apply to direct rollovers such a direct 401(k) rollover to an IRA.

Individuals who took a retirement account distribution prior to March 27 and were still within the 60 days since taking the distribution could have used the 60-day rollover rule to put their distribution back into their respective accounts, classifying it as a rollover.  However, this window was very limited.

In April, the IRS issued the first notice of guidance extending the 60-day rollover rule in 2020:

What qualified?

Distributions taken on or after February 1, 2020 could be rolled over into the retirement account.

When must the distribution be rolled over into the retirement account?

The later of

1. 60 days after receiving the distribution

2. July 15, 2020

This provided greater flexibility for individuals that had taken an RMD after January 31.  However, it still did not cover those that received an RMD in January.  Individuals that had already completed a once per year 60-day rollover within the last 12-months would also have been ineligible to use this rollover rule again to reverse their RMD.  In addition, this rollover window would not apply to non-spouse beneficiaries with inherited IRA accounts, since rollovers are not allowed for those accounts.

IRS Extends Rollover Deadline For All RMDs Made In 2020 To August 31st

In June, the IRS issued further guidance that essentially allows all RMDs that have been taken in 2020 to be repaid.  This IRS notice 2020-51 does the following:

• Rollover deadline has been extended to August 31, 2020 and covers RMDs taken any time in 2020.  This allows those who have taken RMDs as early as January to put the funds back into their retirement accounts by rolling over the funds if it is completed by August 31st.

• This rollover to reverse RMDs taken in 2020 does not count as part of the once per year 60-day rollover. This would allow individuals to use the rollover to prepay their RMDs regardless of whether they had already used a 60-day rollover within the last 12 months.

• Provides an exception allowing non-spouse beneficiaries to return RMDs to their Inherited IRAs in 2020.

A couple of points of note when considering repaying your RMDs taken this year

• The IRS notice 2020-51 only applies to distributions representing your Required Minimum Distribution amount.  Distributions other than your RMD amounts would be subject to the once per year 60-day rollover rule.

• If you had federal or state taxes withheld when you took your required minimum distribution, these amounts cannot be reversed and returned from the federal or state treasuries.  You could return your total gross RMD back to your retirement account, but it would have to be made out-of-pocket.  Any excess withholding would be resolved next year when you file your 2020 tax returns.

While reversing this year’s required minimum distributions may provide some great benefits such as potentially lowering your taxable income in 2020 or allowing for a Roth IRA conversion as an alternative, everyone’s financial situation and tax planning needs are unique.  For some folks, it could make sense to take RMDs if they expect higher income in the future that could fall in a higher tax bracket, for example.

Having a good conversation with your advisors can help you decide what is right for you.  As always, if you have any questions, please don’t hesitate to reach out!

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.