Kimberly McCarthy was recently promoted by The Washington Trust Co. to senior vice president, chief tax and benefits officer, and head of client services for Washington Trust Wealth Management.
PBN: How does your experience in employee benefits, tax and regulatory compliance inform your new role at Washington Trust?
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MCCARTHY: Since I joined Washington Trust in 2018, I have leveraged my experience and expertise as a tax and employee benefits attorney to provide financial planning advice and value-added services to retirement plan, nonprofit and trust/estate clients, as well as our staff managing those client relationships. It could mean answering a question on whether IRA funds can be used to make a tax-free charitable donation, to the regulations surrounding grant-making by private foundations and public charities, to the fiduciary role of the employer sponsoring a 401(k) plan.
PBN: Have you considered what impact the SECURE Act, which went into effect Jan. 1, will have on retirement planning?
MCCARTHY: Absolutely. We have analyzed the act, provided answers to FAQs and other information for customers, which we posted on our website, and we partnered with other thought leaders on informational sessions regarding the SECURE Act.
While many things have changed, a lot has stayed the same, with the most controversial item being the way that Congress paid for the SECURE Act: elimination of the “stretch,” allowing payout over the lifetime of IRA beneficiaries. This is a technical issue that requires review and, potentially, amendments to IRA and trust documents, and we can’t get into all of that detail here.
The main point I would stress is that the use of a trust as an IRA/retirement plan beneficiary and using trusteed IRAs will be more important now than ever for clients who expected their IRAs and 401(k)s – which often constitute the vast majority of their wealth – to last for their children’s entire lifetimes and maybe beyond. This is especially true for older parents (whose children might be quite young when they pass), [and] parents concerned about spendthrift issues, substance-abuse issues, special needs, or the access of a child’s spouse to retirement funds in the event of a potential divorce.
PBN: Do you and your client services teams assist clients with financial planning, particularly around Social Security benefits?
MCCARTHY: A large part of the added value we provide for clients is financial and wealth planning, including using technology to create for them a comprehensive financial plan. In those planning conversations, one major issue is always whether they are ready to retire, when they can retire comfortably and when to elect Social Security benefits. Even though Social Security is always a major topic in political debates, it is surprising that many people have misconceptions around Social Security, including thinking that they can’t collect until they stop working; that waiting longer to start benefits always leads to a bigger benefit; or that once your spouse starts taking Social Security, you have to take it as well.
PBN: What are the biggest tax mistakes retirees and beneficiaries make around IRAs and retirement benefits?
MCCARTHY: Most of the time, we are able to help clients address issues and fix (or at least improve) any mistakes. But there are a few that are really heartbreaking because by the time we get involved, it is too late to help our clients achieve their goals for their IRA or 401(k)/retirement plan.
The biggest one would be failing to update beneficiary forms to ensure the right person receives the benefit. Generally, there are no rules about who can be the beneficiary of a retirement plan – it can be a friend, a charity, a cousin or niece – not just your spouse or immediate family, if you follow the rules and fill out the right forms. But once the IRA owner/plan participant dies, there is essentially nothing you can do. Whoever is listed on the beneficiary designation gets the benefit, and if there is no signed designation, the default rules apply.
PBN: What are your top priorities for leading the client-facing operations of Washington Trust Wealth Management?
MCCARTHY: Washington Trust Wealth Management already has clear market differentiators, a great reputation and excellent people. My top priority is to be strategic in order to leverage those existing strengths. I want to improve efficiency in our behind-the-scenes operations; provide clear direction and focus for the division; and be a stable, responsive and accountable leader that gets things done. That will free up our amazing team of client-facing wealth-management professionals to do what they do best: provide great investment advice, expert fiduciary administration and client service experiences that exceed expectations.
Nancy Lavin is a staff writer for the PBN. Contact her at lavin@pbn.com.
