February 2019 | Collaborative Law Institute

February 18, 2019

As we move into 2019, it’s helpful to know contribution limits and Social Security changes. Individual Retirement Accounts: The annual contribution limits for traditional and Roth IRA’s have increased to $6,000, a boost of $500 over 2018 contribution limits. The catch-up contribution limit for those age 50 and older remains at $1,000. 401(k)s: The annual contribution limits for 401(k)’s, 403(b)’s, most 457 plans, and the federal government’s Thrift Savings Plan have increased to $19,000, a boost of $500 over 2018 contribution limits. The catch-up contribution limit for employees age 50 or older in these plans stays at $6,000 for 2019. SIMPLE IRA: The limit for SIMPLE IRA’s goes up from $12,500 in 2018 to $13,000 in 2019. The catch-up limit remains the same at $3,000 for those age 50 and older. Health Savings Accounts: The “self-only” annual contribution limit will increase from $3,450 to $3,500 and the “family” annual contribution limit will increase from $6,900 to $7,000 in 2019. Social Security Updates:

Beneficiaries will see a 2.8% increase in payments
Maximum taxable earnings will increase to $132,900
Maximum benefit at full retirement age increases to $2,861 per month

February 10, 2019

Wouldn’t it be great if families could complete their divorce in a conference room rather than a courtroom? That’s the thinking behind the Collaborative Process and what makes the Collaborative Law Institute of Minnesota so helpful to divorce professionals and divorcing families. Because of TV shows and just our general culture of “fighting” for our rights, we often think that we have to spend endless amounts of money and fight in court to get a divorce, but that simply isn’t true. In the Collaborative Process, we help families reach agreements without ever setting foot in a courtroom. The Collaborative Law Institute of Minnesota (CLI) trains professionals in areas of law, finances, relationships and mental health to work with families outside of court to reach durable and understandable divorce agreements that work for their families. Law school is focused on training attorneys for inside the courtroom. That’s why we need CLI to train attorneys and other divorce professionals to help clients outside the courtroom. This is a major paradigm shift for the legal profession, but it shouldn’t be so surprising that this is the help and advice that families need and want. Because, let’s be honest, who really wants to go to court?

February 3, 2019

It is important to review and discuss tax planning for the year in which a divorce was completed, especially for high earning individuals who receive incentive compensation and plan to be divorced by December 31, 2018. As part of the 2017 Tax Cuts and Jobs Act, many tax law changes became effective in 2018. One change was to the flat tax rate that is withheld by companies on incentive income such as bonus income, commission income, exercised stock options, and vested restricted stock. As of January 2018, the federal rate changed from 25% to 22%. The Minnesota state rate remains the same at 6.25%. Most highly compensated individuals have marginal tax rates above 22%, so tax on the above income types is under-withheld. To avoid an unpleasant tax surprise come April 15^th, be sure to address this potential additional tax liability and come up with a plan to handle it. Some options to consider are:

Estimate the tax liability now and include and allocate it as part of the property division.
Include language to share in the tax liability when return(s) are filed next year.
Consider whether it makes sense to load-up itemized deductions from the year to the higher earning spouse to help offset liability (i.e. real estate taxes, mortgage interest, charitable contributions).