IRA Inheritance Planning

Individual Retirement Arrangements, or IRAs, are one of the best vehicles for saving for retirement due to the tax advantages that these arrangements present. Depending whether you chose a traditional or a Roth IRA, you can either invest with pre-tax funds or can invest with after-tax dollars and allow money to grow tax free and be withdrawn without paying taxes during retirement.

While IRAs are a powerful tool to help you achieve a secure future, there are complexities associated with passing the assets in your IRA onto loved ones. The issue is, the special tax rules that make IRAs an attractive option for retirement investors can create significant complications when you pass away with money in your IRA and wish to transfer the account to your family members.

Field Law Firm can provide assistance understanding the rules for transferring IRAs and can offer comprehensive advice on IRA inheritance planning so you can make the most informed choices. We can also provide advice to those who have inherited an IRA and who want to minimize tax consequences when assets from the IRA are transferred.

You should give us a call to get personalized advice on making a plan for what will happen to your IRA after you are gone. You can also reach out to our IRA planning attorneys to get answers to questions including:

  • Why is IRA inheritance planning important?
  • What do I need to do to make an IRA inheritance plan?
  • How can an IRA inheritance planning lawyer help?

Why is IRA Inheritance Planning Important?

IRA inheritance planning is important to anyone who has an IRA that will be passed on to loved ones, as well as to anyone who inherits an IRA. Making a plan is vital not only because you want to choose who your beneficiary will be or want to protect a generous gift provided to you, but also because there can be serious tax consequences if the wrong decisions are made in connection with an inherited IRA.

Because an IRA is a tax-advantaged account, there are rules for when and how money must be withdrawn. Required minimum distribution rules (RMDs) require that the IRA accountholder begin making withdrawals from a traditional IRA at 70 ½. This rule doesn’t apply to a Roth IRA.

Unfortunately, withdrawals from a traditional IRA are taxable, so an account owner will need to determine the total amount to take out of the IRA each year. Penalties for failure to take RMDs could equal up to 50% of the amount that shouldn’t been withdrawn, so this needs to be avoided.

An IRA inheritance planning lawyer will help you to understand rules for RMDs during your life and will help you to select a beneficiary who will inherit the IRA after you are gone. The beneficiary could potentially be a trust or an individual. However, the decision regarding who you leave your IRA to matters because your spouse could have more options than other family members.

Those who inherit an IRA are also subject to required minimum distribution rules, which vary depending upon the family relationship and the preferences of the heir. An IRA inheritance plan can involve taking the most strategic approach to required minimum distributions for an inherited IRA.

What do I Need to do To Make an Inheritance Plan?

If you are the owner of an IRA, you should make an inheritance plan to select the right beneficiaries; comply with rules to protect your IRA’s value; and take steps to reduce the amount of taxes your heirs or beneficiaries could end up paying.

If you’ve inherited an IRA, you need to decide if you will be rolling over the inherited IRA into your own IRA; if you want to withdraw the funds from the IRA on a set schedule based on life expectancy or if you want to withdraw the full balance of the IRA by the end of the fifth anniversary of the original owners death. Each of these different approaches has pros and cons, and there are also time limits and other strict rules regarding who can select which option and under what circumstances.

Field Law Firm can help you to navigate the process of dealing with an inherited IRA, or the process of making sure that it is as easy as possible for your family to deal with an IRA you’ve passed down to them.

How can an IRA Inheritance Planning Lawyer Help? 

Field Law Firm knows IRS rules and regulations on inherited IRAs and will help you to make a comprehensive IRA inheritance plan. To find out more about the assistance we can offer, give us a call today at (818) 369-7900 or (435) 216-4444 or contact us online.