Author Archives: Brady Ramsay

About Brady Ramsay

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting. His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006. He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

The Power of Catch-Up Contributions for Retirement Savings

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Are you age 50 or older? You’ve earned the right to supercharge your retirement savings with extra “catch-up” contributions to your tax-favored retirement account(s). And these contributions are more valuable than you may think. Keep reading to learn about the power of catch-up contributions and how to make the most of your retirement savings.

IRA Contribution Amounts

For 2025, eligible taxpayers can make contributions to a traditional or Roth IRA of up to the lesser of $7,000 or 100 percent of earned income. They can also make extra catch-up contributions of up to $1,000 annually to a traditional or Roth IRA. If you’re 50 or older as of December 31, 2025, you can make a catch-up contribution for the 2025 tax year by April 15, 2026.

Extra deductible contributions to a traditional IRA create tax savings, but your deduction may be limited if you (or your spouse) are covered by a retirement plan at work and your income exceeds a certain amount.

Extra contributions to Roth IRAs don’t generate any upfront tax savings, but you can take federal-income-tax-free qualified withdrawals after age 59½. There are also income limits on Roth contributions.

Higher-income individuals can make extra nondeductible traditional IRA contributions and benefit from the tax-deferred earnings advantage.

Employer Retirement Plan Contribution Amounts

For 2025, you can contribute up to $23,500 to an employer 401(k), 403(b) or 457 retirement plan. If you’re 50 or older and your plan allows it, you can contribute up to an additional $7,500 in 2025. Check with your human resources department to see how to sign up for extra contributions.

Contributions are subtracted from your taxable wages, so you effectively get a federal income tax deduction. You can use the tax savings to help pay for part of your extra catch-up contribution, or you can set the tax savings aside in a taxable retirement savings account to further increase your retirement wealth.

How Catch-Up Contributions Grow

How much can you accumulate? To see how powerful catch-up contributions can be, let’s run a few scenarios.

Example 1: Let’s say you’re 50 and you contribute an extra $1,000 catch-up contribution to your IRA this year and then do the same for the following 15 years. Here’s how much extra you could have in your IRA by age 65 (rounded to the nearest $1,000):

  • Four percent annual return: $22,000
  • Eight percent annual return: $30,000

Keep in mind that making larger deductible contributions to a traditional IRA can also lower your tax bill. Making additional contributions to a Roth IRA won’t, but they’ll allow you to take more tax-free withdrawals later in life.

Example 2: Assume you’ll turn 50 next year. You contribute an extra $7,500 to your company plan in 2026. Then, you do the same for the next 15 years. Here’s how much more you could have in your 401(k), 403(b), or 457 plan account (rounded to the nearest $1,000):

  • Four percent annual return: $164,000
  • Eight percent annual return: $227,000

Again, making larger contributions can also lower your tax bill.

Example 3: Finally, let’s say you’ll turn 50 next year and you’re eligible to contribute an extra $1,000 to your IRA for 2026, plus you make an extra $7,500 contribution to your company plan. Then, you do the same for the next 15 years. Here’s how much extra you could have in the two accounts combined (rounded to the nearest $1,000):

  • Four percent annual return: $186,000
  • Eight percent annual return: $258,000

Catch-Up Contribution Amounts Add Up

As you can see, catch-up contributions are one of the simplest ways to boost your retirement savings. If your spouse is eligible too, the impact can be even greater. If you have questions or are curious to find out more about the power of catch-up contributions, contact the tax professionals at Ramsay & Associates. We’ll help you understand how this strategy fits into your retirement savings plan.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Use a Letter of Instruction for Estate Planning

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Including a letter of instruction in your estate plan is a simple yet powerful way to communicate your personal wishes to your family and executor outside of formal legal documents. While not legally binding, the letter can serve as a road map to help those managing your estate to carry out your wishes with fewer questions or disputes. Keep reading to learn more about what to include when using a letter of instruction for estate planning.

Writing an Effective Letter of Instruction

What your letter addresses largely depends on your personal circumstances. However, an effective letter of instruction must cover the following:

Documents and assets. State the location of your will and other important estate planning documents, such as powers of attorney, trusts, living wills, and health care directives. Also, provide the location of critical documents such as your birth certificate, marriage license, divorce documents, and military paperwork.

Next, create an inventory — a spreadsheet may be ideal for this purpose — of all your assets, their locations, account numbers, and relevant contacts. These may include, but aren’t necessarily limited to:

  • Checking and savings accounts,
  • Retirement plans and IRAs,
  • Health and accident insurance plans,
  • Business insurance,
  • Life and disability income insurance, and
  • Stocks, bonds, mutual funds, and other investment accounts.

Don’t forget about liabilities. Provide information on mortgages, debts, and other loans your family should know about.

Digital assets. At this point, most or all of your financial accounts may be available through digital means, including bank accounts, securities, and retirement plans. It’s critical for your letter of instruction to inform your loved ones on how to access your digital assets. Accordingly, the letter should compile usernames and passwords for digital financial accounts as well as social media accounts, key websites, and links of significance.

Funeral and burial arrangements. Usually, a letter of instruction will also include particulars about funeral and burial arrangements. If you’ve already made funeral and burial plans, spell out the details in your letter.

This can be helpful for grieving family members. You may want to mention particulars like the person (or people) you’d like to give your eulogy, the setting, and even musical selections. If you prefer cremation to burial, make that abundantly clear.

Provide a list of people you want to be contacted when you pass away and their relevant information. Typically, this will include the names, phone numbers, addresses, and emails of the professionals handling your finances, such as an attorney, CPA, financial planner, life insurance agent, and stockbroker. Finally, write down your wishes for any special charitable donations to be made in your memory.

Express Your Personal Thoughts

Your letter of instruction complements the legal rigor of your estate planning documents with practical and personal guidance. Indeed, one of the most valuable functions of a letter is to offer personal context or emotional guidance. You can use it to explain the reasoning behind decisions in your will, share messages with loved ones, or express values and hopes for the future.

If you still have questions about how to use or compile a letter of instruction for estate planning purposes, we can help. Contact the estate planning professionals at Ramsay & Associates for additional information.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Estate Planning Tips: 4 Reasons Why Avoiding Probate Is a Smart Move

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When planning your estate, one of the smartest strategies you can adopt is to minimize or avoid probate. Probate is a legal procedure in which a court establishes the validity of your will, determines the value of your estate, resolves creditors’ claims, provides for the payment of taxes and other debts, and transfers assets to your heirs.

While it may sound straightforward, probate can come with several drawbacks that make it worthwhile to avoid when possible. Here are four reasons why avoiding probate is a smart move when it comes to estate planning.

Probate Can Be Time-Consuming

Probate proceedings often take months—and sometimes more than a year—to resolve. During this period, your beneficiaries may not have access to much-needed funds or property.

The timeline can be extended even further if disputes arise among heirs or if the estate includes complex assets. Avoiding probate allows your loved ones to receive their inheritances much more quickly.

Probate Can Be Expensive

Court costs, executor’s and attorneys’ fees, appraisals, and other administrative expenses can consume a portion of your estate, sometimes 5 percent or more of its total value. By using probate-avoidance tools—a living trust, for example—more of your assets can go directly to your heirs instead of being eaten up by fees.

Indeed, for larger, more complicated estates, a living trust (also commonly called a “revocable” trust) generally is the most effective tool for avoiding probate. A living trust involves some setup costs, but it allows you to manage the disposition of all your wealth in one document while retaining control and reserving the right to modify your plan.

To avoid probate, it’s critical to transfer title to all your assets, now and in the future, to the trust. Assets outside the trust at your death will be subject to probate—unless you’ve otherwise titled them in such a way as to avoid it (or, in the case of life insurance, annuities and retirement plans, you’ve properly designated beneficiaries).

Probate Is a Public Process

Bear in mind that anything filed in probate court becomes part of the public record. This means that anyone can discover the details of your estate, including the nature and value of your assets and who has inherited them. Avoiding probate can protect your family’s privacy and shield sensitive information from public view.

Probate May Result in Family Disputes

Probate can sometimes create or exacerbate conflict among heirs. Disputes over asset distribution or the validity of a will can lead to lengthy and expensive litigation. Clear estate planning can prevent misunderstandings and ensure your wishes are carried out smoothly.

Not Your Estate Plan’s Sole Focus

Dealing with the death of a loved one is hard enough without the added burden of navigating the legal complexities of probate. When you structure your estate to bypass the probate process, you ease the administrative burden on your family and give them peace of mind during a difficult time.

However, avoiding probate is just one part of a complete estate plan. The estate planning professionals at Ramsay & Associates can help you develop a strategy that minimizes probate while reducing taxes and achieving your other goals. Contact us today to learn more or to get started.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Reporting Digital Assets: What You Need to Know

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As the use of digital assets like cryptocurrencies continues to grow, so does the IRS’s scrutiny of how taxpayers report these transactions on their federal income tax returns. The IRS has flagged this area as a key focus. To help you stay compliant and avoid tax-related complications, here are the basics of what you need to know about reporting digital assets.

Digital Assets Definition

Digital assets are defined by the IRS as any digital representation of value that’s recorded on a cryptographically secured distributed ledger (also known as blockchain) or any similar technology. Common examples include:

  • Cryptocurrencies, such as Bitcoin and Ethereum,
  • Stablecoins, which are digital currencies tied to the value of a fiat currency like the U.S. dollar, and
  • Non-fungible tokens (NFTs), which represent ownership of unique digital or physical items.

If an asset meets any of these criteria, the IRS classifies it as a digital asset.

Related Question on Your Tax Return

Near the top of your federal income tax return, there’s a question asking whether you received or disposed of any digital assets during the year. You must answer either “yes” or “no.”

When we prepare your return, we’ll check “yes” if, during the year, you:

  • Received digital assets as compensation, rewards or awards,
  • Acquired new digital assets through mining, staking, or a blockchain fork,
  • Sold or exchanged digital assets for other digital assets, property, or services, or
  • Disposed of digital assets in any way, including converting them to U.S. dollars.

We’ll answer “no” if you:

  • Held digital assets in a wallet or exchange,
  • Transferred digital assets between wallets or accounts you own, or
  • Purchased digital assets with U.S. dollars.

Reporting the Tax Consequences of Digital Asset Transactions

To determine the tax impact of your digital asset activity, you need to calculate the fair market value (FMV) of the asset in U.S. dollars at the time of each transaction. For example, if you purchased one Bitcoin at $93,429 on May 21, 2025, your cost basis for that Bitcoin would be $93,429.

Any transaction involving the sale or exchange of a digital asset may result in a taxable gain or loss. A gain occurs when the asset’s FMV at the time of sale exceeds your cost basis. A loss occurs when the FMV is lower than your basis. Gains are classified as either short-term or long-term, depending on whether you held the asset for more than a year.

For instance, if you accepted one Bitcoin worth $80,000 plus $10,000 in cash for a car with a basis of $55,000, you’d report a taxable gain of $35,000. The holding period of the car determines whether this gain is short-term or long-term.

How Businesses Handle Crypto Payments

Digital asset transactions have their own tax rules for businesses. If you’re an employee and are paid in crypto, the FMV at the time of payment is treated as wages and subject to standard payroll taxes. These wages must be reported on Form W-2.

If you’re an independent contractor compensated with crypto, the FMV is reported as non-employee compensation on Form 1099-NEC if payments exceed $600 for the year.

Crypto Losses and the Wash Sale Rule

Currently, the IRS treats digital assets as property, not securities. This distinction means the wash sale rule doesn’t apply to cryptocurrencies. If you sell a digital asset at a loss and buy it back soon after, you can still claim the loss on your taxes.

However, this rule does apply to crypto-related securities, such as stocks of cryptocurrency exchanges, which fall under the wash sale provisions.

Form 1099 for Crypto Transactions

Depending on how you interact with a digital asset, you may receive a:

  • Form 1099-MISC,
  • Form 1099-K,
  • Form 1099-B, or
  • Form 1099-DA.

These forms are also sent to the IRS, so it’s crucial that your reported figures match those on the form.

Evolving Landscape for Digital Assets

Digital asset tax rules can be complex and are quickly evolving. If you engage in digital asset transactions, you should maintain all related records—transaction dates, FMV data, and cost basis. If you have questions about reporting digital assets, contact the tax professionals at Ramsay & Associates. We can help ensure accurate and compliant reporting to minimize your risk of IRS penalties.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Why Choosing the Right Trustee Matters

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It’s not uncommon for an estate plan to contain multiple trusts. They can enable you to hold assets for and transfer them to beneficiaries, avoid probate, and possibly reduce estate tax exposure. When drafting a trust, you must appoint a trustee. While this can be an individual or a financial institution, choosing the right trustee matters. Here are some things to keep in mind as you weigh your options.

Before You Decide on a Trustee

Before choosing a trustee, know that the job comes with many responsibilities — from keeping careful records and making smart investment choices to staying fair and keeping beneficiaries informed. A trustee must always put the beneficiaries’ interests first and handle everything with care, honesty, and good judgment.

What Are a Trustee’s Responsibilities?

Trustees have significant legal responsibilities, primarily related to administering the trust on behalf of beneficiaries according to the terms of the trust document. However, the role can require many different types of tasks. For example, even if a tax professional is engaged to prepare tax returns, the trustee is responsible for ensuring that they’re completed correctly and filed on time.

One of the more challenging trustee duties is to accurately account for investments and distributions. When funds are distributed to cover a beneficiary’s education expenses, for example, the trustee should record both the distribution and the expenses covered. Beneficiaries are allowed to request an accounting of the transactions at any time.

The trustee needs to invest assets within the trust reasonably, prudently, and for the long-term sake of beneficiaries. And trustees must avoid conflicts of interest — that is, they can’t act for personal gain when managing the trust. For instance, trustees typically can’t purchase assets from the trust. The trustee probably would prefer a lower purchase price, which would run counter to the best interests of the trust’s beneficiaries.

Finally, trustees must be impartial. They may need to decide between competing interests while still acting within the terms of the trust document. An example of competing interests might be when a trust is designed to provide current income to a first beneficiary during his or her lifetime, after which the assets pass to a second beneficiary. Although the first beneficiary would probably prefer that the trust’s assets be invested in income-producing securities, the second would likely prefer growth investments.

Qualities of an Effective Trustee

Several qualities help make someone an effective trustee, including:

  • A solid understanding of tax and trust law,
  • Investment management experience,
  • Bookkeeping skills,
  • Integrity and honesty, and
  • The ability to work with all beneficiaries objectively and impartially.

And because some trusts continue for generations, trustees may need to be available for an extended period. For this reason, many people name a financial institution or professional advisor, rather than a friend or family member, as trustee.

We Can Answer Your Estate Planning Questions

Choosing the right trustee is an important decision, as this person or institution will be responsible for carrying out the terms outlined in the trust documents. If you have questions about the process or need further guidance, the estate planning professionals at Ramsay & Associates are here to assist. Contact us today, and we can help you weigh the options available to you.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.