The Supreme Court has finally spoken. Inherited IRAs are not protected on a federal level from creditors of the beneficiary. This ruling has changed the estate planning landscape in more ways than many understand. Certified Financial Planner Joseph Clark examines the importance of estate planning as the legacy plan for your beneficiaries.
You're allowed to name anyone as the beneficiary of your IRA. You’re also allowed to name a non-person as your IRA beneficiary. Examples of non-persons would include charities, a trust, or your estate. It is generally not a good move to name your estate as your IRA beneficiary.When you die, your estate includes the property that you owned at the time you died. It’s a legal entity that’s created after you die. Your executor must then pay your expenses and liabilities and distribute the balance according to your will.
There are three categories of beneficiaries that might want to stretch distributions from their inherited IRAs. A beneficiary's options will depend on which category they find themselves in. We detail these 3 categories below.
IRS has released the 2014 inflation adjusted numbers for estate and gift taxes. See the table at the link below for the numbers and the paragraphs following for a more detailed explanation.
Creating an estate plan can be a very challenging process. For starters, it involves serious contemplation of on'’s death and the resulting aftermath, which can, in and of itself, be an uneasy topic of discussion. In some cases, however, the process can be particularly emotional and technically challenging. Oftentimes this occurs when someone chooses, for one reason or another, to treat children or other similar beneficiaries unequally, perhaps even disinheriting one or more of them.
A Will is a legal document under state law where you name a person to manage your estate and divide your property after you die. Property in your estate must pass through “probate”, which is the process under your state’s law of how your estate is administered and who gets your property. Ideally, you should have a Will. If you don’t, then state law will decide who gets your property after you die. That might not be what you want, so it’s better for you to decide who gets what by having your own Will.
The Internet is a great thing. You can probably find any piece of information you want somewhere out there. It is only a matter of asking the right question. My mother thinks I look everything up on the Internet. However, along with great information available on the worldwide web, there is a lot of misinformation. Some things are just plain wrong and some are very misleading. The Internet is no substitute for expert financial and retirement planning advice - as a recent bankruptcy court case proves.
We frequently see situations where the estate is the IRA beneficiary either because the beneficiary form was never completed, has been lost by the IRA custodian, or, worst of all, the account owner actually named the estate as the beneficiary of the IRA. What options do you have when the estate inherits the IRA? We explain below.
The law allows you to leave money and property to a beneficiary after your death. Generally, the beneficiary must be a person or legal entity capable of accepting the property. Individuals almost always name a beneficiary of their IRA who will inherit the funds after their death. Usually the IRA beneficiary is a person such as a spouse, child, or grandchild. But IRA owners can name a legal entity as their IRA beneficiary, such as a charity, estate, or trust.
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