Might as well stay on a roll regarding inherited IRAs, yes?
As you may recall, this was the subject of yesterday's blog post.
Little wonder IRA's generate so much interest.
According to 2015 estimates, there is just north of $15 trillion socked away in IRAs and defined contribution retirement plans (which themselves are typically rolled out into IRAs at retirement).
More over, some one-third of U.S. households own at least one type of IRA.
Given the odds, you just might inherit an IRA one day.
Before you inherit an IRA you need to plan in advance and avoid some of the known "land mines" that await you.
Enter an article in USA Today titled “If you inherit an IRA, make a plan before doing a thing.”
The article conveniently serves up 10 common inherited IRA mistakes for you to avoid:
- Failing to set up the inherited IRA properly;
- Using the incorrect Life Expectancy Tables—the Single Life Table must be used;
- Using the incorrect Life Expectancy factor—the life expectancy factor of the beneficiary in the current year must be used;
- Not taking the Required Minimum Distribution (RMD) after death of owner and in future years (result: a 50% penalty);
- Using the incorrect IRA balance for the RMD calculation—the value of the account as of December 31 of the prior year must be used to calculate the RMD (again, under-withdrawal means a 50% penalty);
- Not naming beneficiaries could mean acceleration of distribution for the inherited IRA beneficiary;
- Failing to make a trustee-to-trustee transfer in the establishment of an Inherited IRA—no 60-day rollover rule here;
- Commingling other non-inherited IRA funds with an inherited IRA;
- Not confirming that the RMD is taken out of account by December 31 each year; and
- Not establishing the inherited IRA before December 31 of the year following the death of the owner.
That is a pretty straightforward list.
In the end, make sure you have the solid advice of an experienced estate planning attorney, financial advisor and accountant before making any legal or financial moves you cannot undo.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Reference: USA Today (March 15, 2016) “If you inherit an IRA, make a plan before doing a thing”