Even though you made sure toprepare your Last Will and Testament, it is not always the final word on thedistribution of your assets. Take for example your IRA. An IRA will be directedby the common beneficiary form â€“ of which you may have completed withoutthinking through the potential outcome.
Warning: do not designate yourâ€œestateâ€ as the beneficiary of your IRA. This severely limits the distribution(and taxation) options available to your heirs. This matter was explored in arecent article in The Slott Reporttitled â€œIRAs and Wills Donâ€™t Mix.â€
While your â€œestateâ€ can be thebeneficiary of your IRA and your Will thereafter determines the distribution ofthe retirement funds, this might not be best idea tax-wise. IRAs are veryspecific and peculiar assets with very specific inheritance rules. If yourâ€œestateâ€ is the beneficiary of your IRA, then very â€œunfavorableâ€ withdrawalrules apply. Instead of the IRA being withdrawn over the life expectancy of thebeneficiary (typically younger than the plan owner), the funds must bewithdrawn within five years or perhaps over your remaining life expectancy.Yes, this can get rather complicated.
Make sure you consult withcompetent legal counsel when coordinating the distributions from your Last Willand from your IRA.
For more information on this and otherestate planning subjects, contact IdahoEstate Planning and schedule aconsultation. Remember,good planning is no accident.