Welcome to the latest edition of Fiscal Fitness! It's tax time as I write this. As usual, this is the time of year I come across many "avoidable" financial planning mistakes.

Remember, the IRS allows only 1 rollover per year. With an IRA rollover, for example, at retirement you have the choice to roll your 401(k) to an Individual Retirement Account (IRA). Your employer automatically withholds 20%, which is a mandatory withholding, and sends you the proceeds. You then have 60 days to get that money back into an IRA. If you miss the 60 day cutoff, the amount is fully taxable! The optimal way to get the money to an IRA is to do a trustee-to-trustee transfer. In this case, there is no automatic withholding and your employer can make the check payable to the new custodian for your benefit.

A new client came to me who is the executor of her mother's estate. She found a statement for an IRA at a brokerage firm that listed herself and three siblings, as named beneficiaries on the account. That's the good news. The bad news is the advisor offered to send each of them a check, which could either be cashed or "rolled" into their own IRA accounts within 60 days. The problem is that Beneficiary IRAs are not allowed to do an IRA rollover. Once distributed, it becomes a taxable event. The only way to avoid taxation and maintain the tax deferral, known as a "stretch IRA", is to do a trustee-to-trustee transfer. With any beneficiary IRA, the deceased person's name must stay on the account registration along with the beneficiary's name.

After meeting with Ann and reviewing all the assets in her mother's estate, we found that her sister "Jane" was listed on her mother's checking account. Perhaps the intent was to make it simpler for check writing and paying bills if she was ever disabled (a Durable Power of Attorney would have addressed this concern). According to the will, all proceeds of the estate were to be divided equally among the four daughters. However, due to the account registration of Joint with Rights of Survivorship, the asset passes outside of probate directly to the joint owner. Jane was under no obligation to share the proceeds with her siblings and decided to keep the account for herself. Was that her mother's intent?

Ann didn't realize that certain assets that name a beneficiary are not governed by the will. When contacting the insurance carrier regarding her mother's life insurance policy, she found that her oldest sister was listed as beneficiary. Her mom always said that there was a policy to pay for funeral expenses and not to worry. Again, the beneficiary was under no obligation to share with her siblings. Guess who kept the proceeds? Beneficiary designations on 401(k)s, IRAs, annuities and life insurance policies are often left blank, incorrectly list a minor or just haven't been updated to reflect current wishes.

Often overlooked, RMDs must begin by the time you reach you reach age 70 ^1/2. By not taking the RMD, there is a 50% penalty on the amount that should have been taken. The IRS does allow you to postpone your first distribution until the year following the year you turn 70 ^1/2. Confusing? You bet. What most people don't understand is that although you can postpone that distribution, you are taking double distributions in one tax year.