IRAs can be a great estate planning tool.
Do you have an IRA?
If you are engaged in retirement planning, then you likely do.
What if you die with money still in this account?
According to a recent Investopedia article titled “Inherited IRA and 401(k) Rules Explained,” what happens will depend on who you want to inherit and whether you worked with an experienced estate planning attorney.
Why?
There are very complex rules to follow to keep more money for your beneficiary and less for the IRS.
What if you leave your IRA to your spouse?
The IRA can be treated as his or her own.
The spouse will take the appropriate required minimum distributions upon reaching age 70½.
What if you leave it to a non-spouse?
If done right, this individual could stretch the IRA over his life expectancy and allow it to grow tax-deferred between distributions.
The beneficiary could accidentally trigger taxable events if he or she is uneducated about the rules.
What are some of these rules?
A non-spouse can "disclaim" his interest in all or part of the IRA funds to other eligible beneficiaries.
He or she could also choose to open an inherited IRA account.
Any distributions from this account will be taxable.
The inherited IRA must remain separate.
You cannot combine it with your currently existing IRA.
Still, you can control and name beneficiaries for the account you inherit.
This is merely a brief overview.
To create a plan to fit your needs and goals, work with an experienced estate planning attorney.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").
Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
How?
Two helpful online resources are just a mouse click away to assist with your due diligence: Avvo.com and Lawyers.com.
Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
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.
Reference: Investopedia (December 18, 2017) “Inherited IRA and 401(k) Rules Explained”
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