Even if you remember to assign your IRA with the correct beneficiary designation, there are many benefits in using a trust to distibute your IRA after death.   One such benefit is the ability to provide asset protection to your beneficiaries once they receive the money from the IRA.  Recently, the Florida Supreme Court ruled that inherited IRA’s do not have the same asset protection features as self-owned IRA’s do.  A trust would supply the asset protection that an inherited IRA currently lacks.

Unlike an IRA, a 401k will automatically transfer to a surviving spouse no matter who the designated beneficiary is.

IRAs and Estate Planning

With a growing number of retired people in South Florida, not paying attention to how your IRA will be distributed after your death could cost your family a small fortune.  Your designated beneficiaries can still receive the IRA proceeds but they will be forced to empty the account and pay taxes on it much faster if it is not addressed as part of a comprehensive South Florida estate plan.

The beneficiaries of IRA plans may stretch out the distributions across their life expectancy.  Through aggressive and creative estate planning, an IRA of decent size could be converted into generational wealth.  You may be able to use your IRA to find your grandchildren’s college education while saving your children estate taxes in the process.  It all depends on the beneficiary forms and how they fit with the rest of your South Florida estate plan.

The key is to make certain that your IRA’s custodian rules allow your heirs to move the IRA to a different custodian via a trustee-to-trustee transfer that avoids triggering a taxable event.  Your South Florida estate planning attorney should make certain that your heirs are free to name successor beneficiaries which would allow your grandchildren to take distributions based on their life expectancies rather than on your children’s.

People assume that any lawyer is qualified to prepare their South Florida estate plan or worse yet, they attempt to do it themselves.  Wills don’t govern accounts with beneficiary designations such as 401(k) plans, life insurance policies, or IRA’s which could cost your heirs thousands of dollars.  Estate planning is a legal specialty and you should always consult your South Florida estate planning attorney for all of your estate planning needs.  Please call the South Florida estate planning attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 to set up your free consultation, or email us at info@wfplaw.com for more information.  Let us protect what you value most.