Anything that you own becomes part of your estate at the time of your death. For many people, this includes an Individual Retirement Account, or IRA. When structured properly, a gift of an IRA can provide years of financial security to the beneficiaries. If, however, a gifted IRA account is not handled properly then the beneficiaries can lose out on a significant portion of the benefits.
If you plan to leave an IRA as part of your estate, or if you believe that you will be inheriting an IRA, it is crucial that you understand the rules that apply to gifting an IRA account. While nothing can take the place of a one on one discussion with your estate planning attorney about your particular situation, there are some general guidelines to remember when gifting an IRA.
Probably the most important thing you need to understand is that the rules that apply to an inherited IRA are not the same as those that apply to an original owner IRA. For that reason alone, it is very important that you do NOTHING if you find that you have inherited an IRA until you have talked to an estate planning attorney. Moving the funds to another IRA, for example, could trigger a penalty even if done within 60 days unlike the rules that probably apply to an IRA that you personally own. On the other hand, you could be required to take a distribution if the original owner was over the age of 70 ½ at the time of death.
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- Beneficiary Designations and Other Non-Probate Transfers - August 15, 2020
- Leaving Assets Can Be Tricky – Part 3 - August 13, 2020