Wednesday, July 19, 2017

For Estate Planning, Structure Has to Suit the Situation


“Regardless of the form, federal tax rules are generally the same for all IRAs,” the American Institute of CPAs explains, “But the structure of the IRA agreement, the authors of 360 degrees of financial literacy add, “can have a significant impact on how your IRA is administered.”

At Geyer Law, we often discuss with clients the different options when setting up their IRA in coordination with their overall estate planning goals.
Stretch IRAs
Many find the “stretch IRA” to be useful, because, when the IRA owner dies, the beneficiary is eligible to re-title the account as an inherited IRA, taking Required Minimum Distributions based on his or her own age, thus continuing the tax deferral on the bulk of the money.

Attention must be paid to certain crucial details when setting up a “stretch”. 
  • The new account must be properly titled: “Jane Doe IRA (deceased Feb. 27, 2017) FBO Susan Doe”.
  • Jane Doe’s Required Minimum Distribution must be take out before the amount is transferred to the inherited IRA.
  • The funds must be transferred before the end of the year following the year of the original IRA owner’s death.
Trusteed IRAs
An increasingly popular option is a trusteed IRA. Under this arrangement, the IRA itself becomes a trust, with the financial organization acting as the trustee. In a recent article in Financial Planning Magazine, IRA expert Ed Slott explains that a trusteed IRA might be most suitable for clients whose IRA is their largest asset by far.

Advantages to a trusteed IRA arrangement include:
  1. greater control for the IRA owner and less control to the beneficiaries. (In the typical IRA, the beneficiary can take control of the IRA assets and there might be a concern that the assets might be squandered)
  2. greater control over the ultimate beneficiaries (A trusteed IRA lets you specify contingent beneficiaries that cannot be changed by the primary beneficiary.
At Geyer Law, our attorneys are dedicated to providing in-depth counseling to individuals and families. Recommending the appropriate structure for IRA assets is just one aspect of the work we do, helping our clients accomplish practical estate planning solutions.


- by Ronnie of the Rebecca W. Geyer & Associates blog team

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