What needs to be done when you inherit an Individual Retirement Account (IRA) (including Roth IRAs)?
For an account that is probably the widest-used tax shelter, the tax rules that apply to IRAs are very complex. There are actions that need to be done in a very short time frame, or significant tax benefits can be lost and big penalties can be imposed (like a 50% penalty for failure to take a required minimum distribution).
Executors and trustees don't administer IRAs. A decedent who owned an IRA might not even have an estate or trust. The beneficiary of an IRA might have to track down information about the account and apply to the custodian for benefits.
CPA extraordinaire Michael Jones has taken on the difficult task of spelling out what the beneficiary of an IRA should do. Other IRA experts that praise his book include Natalie Choate, Robert Keebler and Ed Slott (and little old me).
Michael Jones mostly works as a consultant to estate attorneys and CPAs on difficult estate litigation cases. He performs mathematical financial analyses that remind me of an actuary. He wrote Final Regulations Governing Required Minimum Distributions, a special supplement to The Pension Answer Book. He is the chair of Trust and Estates magazine's Retirement Benefits Committee. Michael is a widely-sought speaker for Tax and Estate Institutes around the United States, has written many articles for professional publications and has been quoted in the Wall Street Journal, New York Times, Forbes magazine and other publications.
At a recent Estate Planning Council meeting, Michael bragged there isn't one footnote or Internal Revenue Code reference in this book. In my opinion, the book is authoritative, but won't be the last stop for tax practitioners. They need to know the source of the information. This book is intended to be a guide for the layperson, working together with tax and estate counsel.
Here are a few questions answered in this book:
- Is a distribution required for the year of death? If so, who gets it?
- How should you handle an account with multiple beneficiaries? (What if a charity is also a beneficiary?)
- Should a surviving spouse always immediately rollover an inherited IRA to his or her own account?
- What distributions are required for a beneficiary other than a surviving spouse, and when must they be made?
- What happens when a trust is named as a beneficiary of an IRA?
- Can you redirect your benefits to someone else?
The "Great Generation" is in its 80s and 90s. The Baby Boomers are becoming senior citizens. Many of these individuals will become deceased in a short time, and you might be one of their beneficiaries. You will be better prepared if you own and read Inheriting An IRA. You can get a copy at www.inheritinganira.com.
Buy it on Amazon: Inheriting an IRA: How to Create a Lifetime of Paychecks.
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