4-Minute Money Ideas

Avoid These Common Mistakes When You Receive an Inheritance

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

A new client recently told me, “My late father left me an inheritance of an IRA (Individual Retirement Account) worth $1.5 million, and I’m the sole beneficiary. What should I do with it? If I bring the money to Israel, I’ll have to sell the stocks and wire the money to my account here. But if I do that, I’ll have to pay tax in the United States and maybe Israel, too.”

Unfortunately, many beneficiaries make costly money mistakes. Read about the mistakes you should avoid if one day you receive an inheritance, and then check out our free interactive tool at www.profile-financial.com/interactive.

Don’t take money out of the IRA

If a beneficiary withdraws the funds from the IRA, he’ll lose a fantastic American tax benefit. People with regular IRAs only pay tax on the money they withdraw. Any money remaining in the account can continue to grow untaxed. An inheritor can transfer the original IRA into a “beneficiary IRA” (a.k.a. “stretch IRA”) and this maintains the tax-deferred status of the account until the money is eventually withdrawn.

No U.S. capital gains tax on sales inside an IRA

According to IRS rules, U.S. citizens holding IRAs don’t pay capital gains tax (or tax on interest and dividends) when they sell stocks for a profit inside their account. This is a huge benefit when compounded over many years.

Probably no estate tax

U.S. citizens who leave their estates to their American-citizen spouses or children don’t have to pay estate tax as long as they don’t exceed the “federal estate tax exemption,” which is $5.45 million (as of 2016). (Be sure to consult with a qualified tax advisor in case there’s any state or local estate tax.)

As I don’t give tax advice to clients, I always tell beneficiaries of an inheritance to consult tax professionals. I often work directly with clients and their accountants to make sure that their investments and tax obligations are handled properly.

If you’re getting an inheritance and you live in Israel, make sure to check out www.profile-financial.com/interactive.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

A Guide to the Tax Implications of a Legal Settlement

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

This is a two-part article addressing questions that arise when people receive lump sums. For the entire article, go to: www.profile-financial.com/settlement.

I recently helped a number of people who are in the midst of receiving a cash settlement from a lawsuit, and had to point out that winning a lawsuit is not "free money." In addition to having survived personal injury and a long-drawn out legal case, there may be tax implications to a legal settlement.

Lost wages or profits

If you are unfairly dismissed from employment, you may receive a settlement for lost wages, benefits, severance, back pay, or other income. According to the IRS, this settlement is considered regular income, even though severance pay is often tax free in Israel. This kind of settlement is also subject to the Social Security wage base table and Medicare tax rates for the year in which you were paid. Reporting legal compensation for lost wages is similar to reporting income for regular pay when you were employed.

Interest payments

Interest on any settlement, as with any income, is taxable and should be reported as "interest income."

Punitive damages

Punitive damages are taxable and therefore must be reported, even if received in a settlement for personal or physical illness or injuries.

Estimate tax

Make estimated tax payments early if you know you're going to owe at least $1,000 in income tax from having to report receipt of a legal settlement amount.

Taxation on settlements is complicated. Remember to speak with a qualified tax advisor to get advice since this article is just for general information. We help people manage their U.S. investment account, not file their tax returns.

Free information

To get this complete article along with the IRS's information about what you need to report to the IRS regarding a legal settlement, go to: www.profile-financial.com/settlement

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

A Guide to the Tax Implications of a Legal Settlement

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

This is a two-part article addressing questions that arise when people receive lump sums. For the entire article, go to: www.profile-financial.com/settlement.

I recently helped a number of people who are in the midst of receiving a cash settlement from a lawsuit, and had to point out that winning a lawsuit is not “free money.” In addition to having survived personal injury and a long-drawn out legal case, there may be tax implications to a legal settlement.

Lost wages or profits

If you are unfairly dismissed from employment, you may receive a settlement for lost wages, benefits, severance, back pay, or other income. According to the IRS, this settlement is considered regular income, even though severance pay is often tax free in Israel. This kind of settlement is also subject to the Social Security wage base table and Medicare tax rates for the year in which you were paid. Reporting legal compensation for lost wages is similar to reporting income for regular pay when you were employed.

Interest payments

Interest on any settlement, as with any income, is taxable and should be reported as “interest income.”

Punitive damages

Punitive damages are taxable and therefore must be reported, even if received in a settlement for personal or physical illness or injuries.

Estimate tax

Make estimated tax payments early if you know you’re going to owe at least $1,000 in income tax from having to report receipt of a legal settlement amount.  

Taxation on settlements is complicated. Remember to speak with a qualified tax advisor to get advice since this article is just for general information. We help people manage their U.S. investment account, not file their tax returns.

Free information

To get this complete article along with the IRS’s information about what you need to report to the IRS regarding a legal settlement, go to: www.profile-financial.com/settlement

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

A Guide to the Tax Implications of a Legal Settlement

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

This is a two-part article addressing questions that arise when people receive lump sums. For the entire article, go to: www.profile-financial.com/settlement.

I recently helped a number of people who are in the midst of receiving a cash settlement from a lawsuit, and had to point out that winning a lawsuit is not "free money." In addition to having survived personal injury and a long-drawn out legal case, there may be tax implications to a legal settlement.

Lost wages or profits

If you are unfairly dismissed from employment, you may receive a settlement for lost wages, benefits, severance, back pay, or other income. According to the IRS, this settlement is considered regular income, even though severance pay is often tax free in Israel. This kind of settlement is also subject to the Social Security wage base table and Medicare tax rates for the year in which you were paid. Reporting legal compensation for lost wages is similar to reporting income for regular pay when you were employed.

Interest payments

Interest on any settlement, as with any income, is taxable and should be reported as "interest income."

Punitive damages

Punitive damages are taxable and therefore must be reported, even if received in a settlement for personal or physical illness or injuries.

Estimate tax

Make estimated tax payments early if you know you're going to owe at least $1,000 in income tax from having to report receipt of a legal settlement amount.

Taxation on settlements is complicated. Remember to speak with a qualified tax advisor to get advice since this article is just for general information. We help people manage their U.S. investment account, not file their tax returns.

Free information

To get this complete article along with the IRS's information about what you need to report to the IRS regarding a legal settlement, go to: www.profile-financial.com/settlement

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

A Guide to the Tax Implications of a Legal Settlement

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

This is a two-part article addressing questions that arise when people receive lump sums. For the entire article, go to: www.profile-financial.com/settlement.

I recently helped a number of people who are in the midst of receiving a cash settlement from a lawsuit, and had to point out that winning a lawsuit is not “free money.” In addition to having survived personal injury and a long-drawn out legal case, there may be tax implications to a legal settlement.

Lost wages or profits

If you are unfairly dismissed from employment, you may receive a settlement for lost wages, benefits, severance, back pay, or other income. According to the IRS, this settlement is considered regular income, even though severance pay is often tax free in Israel. This kind of settlement is also subject to the Social Security wage base table and Medicare tax rates for the year in which you were paid. Reporting legal compensation for lost wages is similar to reporting income for regular pay when you were employed.

Interest payments

Interest on any settlement, as with any income, is taxable and should be reported as “interest income.”

Punitive damages

Punitive damages are taxable and therefore must be reported, even if received in a settlement for personal or physical illness or injuries.

Estimate tax

Make estimated tax payments early if you know you’re going to owe at least $1,000 in income tax from having to report receipt of a legal settlement amount.  

Taxation on settlements is complicated. Remember to speak with a qualified tax advisor to get advice since this article is just for general information. We help people manage their U.S. investment account, not file their tax returns.

Free information

To get this complete article along with the IRS’s information about what you need to report to the IRS regarding a legal settlement, go to: www.profile-financial.com/settlement

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

Did You Make a Mistake When You Opened Your Bank Account?

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

What happened when you opened your first Israeli bank account after making aliya?

A new oleh recently told me: "I just tried your online tool [www.profile-financial.com/olim] to find out what I need to know about having a U.S. brokerage account now that I've made aliya. But I think I made a mistake when I opened my new Israeli bank account."

He had gone to a local bank and told them that he wanted to bring some money over to Israel. The clerk there answered that as there is now an information exchange agreement between Israel and the United States (true), he needs to sign an IRS form called a W8 (false). The mistake was the form number, not the fact that the details of the Israeli bank account would be available to the IRS.

What forms do I sign?

If you open an Israeli bank account, you need to sign a W9 form (not W8), which tells the bank that you are a U.S. citizen. It provides the bank with your Social Security number to allow for easy reporting to the IRS. The W8 form is used for non-U.S. citizens.

You might be familiar with the W9 form from opening accounts in the States. In fact, when we help American olim with their IRA (Individual Retirement Account), brokerage, or other investment accounts, we have them sign a W9.

Are there restrictions on my investments from Israel?

Now that you live overseas, you may find that some companies, banks, and mutual funds won't want to work with you. But don't worry. Even if your old firm has a problem with overseas clients, it's easy to set up a U.S. brokerage account while you live in Israel. You can find answers to many common questions on this subject at www.profile-financial.com/olim . If you'd like to discuss your situation, call 02-624-2788.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

Did You Make a Mistake When You Opened Your Bank Account?

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

What happened when you opened your first Israeli bank account after making aliya?

A new oleh recently told me: “I just tried your online tool [www.profile-financial.com/olim] to find out what I need to know about having a U.S. brokerage account now that I’ve made aliya. But I think I made a mistake when I opened my new Israeli bank account.”

He had gone to a local bank and told them that he wanted to bring some money over to Israel. The clerk there answered that as there is now an information exchange agreement between Israel and the United States (true), he needs to sign an IRS form called a W8 (false). The mistake was the form number, not the fact that the details of the Israeli bank account would be available to the IRS. 

What forms do I sign?

If you open an Israeli bank account, you need to sign a W9 form (not W8), which tells the bank that you are a U.S. citizen. It provides the bank with your Social Security number to allow for easy reporting to the IRS. The W8 form is used for non-U.S. citizens.

You might be familiar with the W9 form from opening accounts in the States. In fact, when we help American olim with their IRA (Individual Retirement Account), brokerage, or other investment accounts, we have them sign a W9.

Are there restrictions on my investments from Israel?

Now that you live overseas, you may find that some companies, banks, and mutual funds won’t want to work with you. But don't worry. Even if your old firm has a problem with overseas clients, it’s easy to set up a U.S. brokerage account while you live in Israel. You can find answers to many common questions on this subject at www.profile-financial.com/olim . If you’d like to discuss your situation, call 02-624-2788.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

What You Need to Know About Premium Bonds

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

Premium bonds may be a good investment choice for retirees looking to increase their income. (For solutions to other problems retirees face, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb.)

Consider premium bonds

In today's low interest rate environment, if you park your money in bank deposits or money markets, the interest you receive generally will not be enough to pay your bills. Even leaving a million dollars in Certificates of Deposit (CDs) in a bank will only generate a few thousand dollars a year of spending money. So how can retirees supplement their income without too much risk to their principal?

A solution may be to purchase bonds, especially "premium bonds." Buying a bond means lending money to a country or a company. In return using your money for a set period of time, they pay you interest. Since bonds are not as safe as bank deposits, they generally pay a higher yield.

Some bonds issued previously offer high "coupon rates." They may be higher than what newly-issued bonds pay today. Since everyone wants to get a higher interest rate, these high-coupon bonds sell at a premium price. By buying a premium bond, you get more cash flow from your investments than if you buy a bond at par or at a discount. When the premium bond matures, you won't get the same amount back that you paid. But you will have received more cash flow every year, which means that you have effectively achieved your goal.

Premium bonds are not for everyone, and they carry risks, but anyone who is looking for income should consider if they are appropriate for their individual situation. For more information about how to have a financially stronger retirement, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb. Alternatively, call me on 02-624-2788 and let's start talking about the best way to get income from your investments.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

What You Need to Know About Premium Bonds

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

Premium bonds may be a good investment choice for retirees looking to increase their income. (For solutions to other problems retirees face, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb.)

Consider premium bonds

In today’s low interest rate environment, if you park your money in bank deposits or money markets, the interest you receive generally will not be enough to pay your bills. Even leaving a million dollars in Certificates of Deposit (CDs) in a bank will only generate a few thousand dollars a year of spending money. So how can retirees supplement their income without too much risk to their principal?

A solution may be to purchase bonds, especially “premium bonds.” Buying a bond means lending money to a country or a company. In return using your money for a set period of time, they pay you interest. Since bonds are not as safe as bank deposits, they generally pay a higher yield.

Some bonds issued previously offer high “coupon rates.” They may be higher than what newly-issued bonds pay today. Since everyone wants to get a higher interest rate, these high-coupon bonds sell at a premium price. By buying a premium bond, you get more cash flow from your investments than if you buy a bond at par or at a discount. When the premium bond matures, you won’t get the same amount back that you paid. But you will have received more cash flow every year, which means that you have effectively achieved your goal.

Premium bonds are not for everyone, and they carry risks, but anyone who is looking for income should consider if they are appropriate for their individual situation. For more information about how to have a financially stronger retirement, download a free copy of The Retirement Planning Book at www.profile-financial.com/rpb. Alternatively, call me on 02-624-2788 and let’s start talking about the best way to get income from your investments.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.

The Best Way to Invest When You Want to Gift Money

By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel

Recently, a couple with four children of various ages asked me for advice on how to invest funds that they had just inherited. They didn't need the inheritance for themselves, and they wanted to pass it along to their children.

The couple's oldest child was married and wanted to buy a house, so getting her share of the funds now made a lot of sense. "What stocks should we invest in for her?" the clients asked. "None," I said. "Money that you want to use in the short term should be in cash or short-term bank deposits because it needs to be safe. The stock market carries risk."

As the next two children wouldn't need the money for the next four or five years, they could afford to take some risk and try to grow their gift. A broadly diversified portfolio that included stock and bond funds could increase their odds of growth. Before getting started, though, I explained the level of the risk and tried to give the clients a sense of what to expect with regard to volatility.

Should you invest aggressively?

The couple's youngest child was only 14 and would not need the money for some time. So the clients thought that they could afford to take more risk with his portion and put it all into stocks. I warned them that even though the stock market has traditionally offered stronger returns than other asset classes, growth is not guaranteed and they could lose money. In the end, the couple chose to use a "money manager" to handle that portfolio as they felt that this would be the best way to diversify and manage these funds.

To find out more about using a money manager, watch the 12-minute video at www.profile-financial.com/videos/SMA. To start a conversation about handling your investments, call my office (02-624-2788).

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.