Estate Planning With IRAs

An Individual Retirement Account (IRA) Is a structured way that allows you to save for your retirement while deferring taxes on your growing nest-egg. The concept of investing in an IRA is simple, but using an IRA for retirement planning can quickly become complicated. The IRS rules involving IRAs are complex, and it is wise to discuss your retirement plan with an estate planning lawyer. An estate planning lawyer can help you ensure that you are considering state tax reduction techniques and that you are taking advantage of all of the legal ways to use retirement accounts. An estate planning lawyer will ensure that you are acting in line with all of the current IRS regulations related to 401k and IRA retirement accounts.

IRA Rules are Complex

What happens if you pass away? Who will receive the assets in your IRA account? There is a significant amount of complexity and uncertainty related to how the IRS and the administrator of your personal IRA account will manage the issue of Taxation should you pass away. Some IRA plan administrators require that the beneficiary withdrawal the balance of the IRA within 125 years. However, the IRS may allow someone to withdraw the balance of the IRA within a greater number of years.

Whether you are concerned about your beneficiary withdrawing funds from your IRA, or you have recently inherited the funds in an IRA, an estate planning lawyer can help. An estate planning lawyer will review the regulation related to your IRA and help you understand what will happen after you pass away. If you have inherited an IRA, an estate planning lawyer can help you withdraw the funds according to IRS regulations. A lawyer will also help you create a plan to protect as much of the assets as possible from potential creditors and decrease your tax liability, if possible.

Suppose you name your spouse as the beneficiary of your IRA account. Your spouse should take advantage of the maximum income deferral benefits for you and your spouse. However, if you directly name your spouse, you could lose many of the available protections. It cannot be confident that your children will secure the assets in the IRSA as an inheritance. An estate planning lawyer can help you ensure that your beneficiaries receive the benefits to which they are entitled.

IRAs and Estate Tax Planning

Many married couples will designate their spouse as the beneficiary of their IRA account. When the spouse who owns the IRA passes away, the surviving spouse will become the IRA owner. There will be no estate taxes imposed on the spouse because the Unlimited Marital Deduction protects the surviving spouse. This plan protects surviving spouses from income tax or state tax uncertainty. When the owner spouse names the surviving spouse directly, the surviving spouse can treat the IRA assets as his or her assets. This process is often called a “spousal rollover.” In some circumstances, an individual may not want to name his or her spouse directly. Instead, they may choose to create a trust and transfer ownership of the IRA to the trust.

Trusts and IRA Estate Planning

Placing an IRA in trust has a few key benefits. First, doing so can protect the IRA owner’s children. Suppose a married couple has seven children. Four children are from the husband's first marriage, and three children are from the wife’s first marriage. They were married after the children had grown up. Each of the spouses would like to benefit the other spouse and his or her biological children. If the husband has a large IRA, he may be concerned that the wife may not leave his biological children’s assets if he designates her as the owner of his IRA after he passes away.

By transferring ownership of the IRA into a trust, he can ensure that the trust will distribute the trust’s assets to his surviving spouse and his children. He can rest easy knowing that the trustee will protect the IRA assets after he passes away and ensure the people he designates receive the assets. Another benefit of using a trust is that trusts often provide greater protection against lawsuits.

Contact a Charlotte Estate Planning Lawyer Today

If you have questions about your IRA, the experienced estate planning lawyers at Arnold & Smith, PLLC are here to help. We will review your estate plan and ensure that you are taking advantage of all legal ways to utilize retirement savings accounts. Contact us today to schedule your free initial consultation.