Many of us are getting older, and many of us have IRA’s. Perhaps it would be a good time to review your plan for leaving the IRA to your heirs, church, etc. I will offer some suggestions, but your job is to check with your attorney and tax advisor to make sure any changes you make line up with your other legal and financial documents. Also, you want to be careful with possible tax consequences. Most of us will leave our IRA to our spouses. Your spouse, if desired, can roll the balance in your IRA into his or her own IRA. This can be beneficial if he or she has not reached the 70.5 age for RMD’s, because the required minimum distribution rule is based on the surviving spouse’s age, not the decedent’s. If your partner is not so young and does not need the proceeds from your IRA to maintain a lifestyle, there are other options available to you.
The obvious choice is to leave the IRA to your child or children. Non-spouses who inherit IRA’s can roll the money into an “inherited” IRA and stretch out the required distributions over their lifetime, if they choose to do so. Most don’t take this opportunity because of a perceived need to use the inheritance immediately or because they were not named as a designated beneficiary. If your goal is to make this stretch provision available to your loved one, make sure you have filled out the beneficiary designation form, not just named the person in your will. Also, discuss this action with your adult child so that they will know what your plan is and why it will be beneficial to them. If the child is a minor, set up a custodian in your will to manage the account until the child reaches a designated age.
Another popular choice is to leave your IRA to charity. The charity will receive the assets tax-free and your estate will get a deduction. Work with your tax advisor to make sure all the details are handled correctly. You can also name your estate as the beneficiary of the proceeds, but this is usually less desirable because your estate will have to liquidate the IRA within a specific period of time, depending on whether the deceased had begun taking RMD’s. One other option is to designate a trust as beneficiary. This involves extra costs and can add complexity to an estate plan, but if you have a loved one with special needs or a child with a tendency to spend without limits, a trust may be a good solution. The bottom line is to be aware of your options, study the pros and cons of each, and use your advisors guide you in your decisions.
We want to leave our inheritance to someone or something we love. Here is a meditation on love from a recent “Forward Day by Day” entry: “I believe that grace is love where love does not have to be, where there is no reason for love. I see grace in acts of affection that occur without explanation, just as the grace God bestows on us every minute of every day. Grace is the love, unconditional and whole, that God gives us for no other reason than we are in this world, and we are who we are. This love-this radical and all-consuming love-carries me through my days. I ride it like a river coursing through my being. Because I am loved in this way, I am open to love. We are supposed to love everyone. I have come to a point that I have no choice in the matter. My heart loves. It is frightening. It is exhilarating.”
Although this information has been gathered from sources believed to be reliable, it cannot be guaranteed. This material is intended for informational purposes only and should not be construed or acted upon as individualized tax, legal or investment advice. FSC Securities Corporation does not offer tax or legal advice. The views expressed are not necessarily the opinion of FSC Securities Corporation. Financial Solutions Group is a marketing name. Financial Solutions Group is located at 128 Versailles Blvd, Alexandria, LA 71301. We can be reached at (318) 448-3201. Securities, insurance and advisory services offered through FSC Securities Corporation, member FINRA/SIPC.