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How to Plan for Inherited IRAs

Mistakes made with an inherited IRA can quickly become very expensive. During life and after death, IRAs are distributed differently than other assets.

Mistakes made with an inherited IRAs can quickly become very expensive.

During life and after death, IRAs are distributed differently than other assets. IRAs cannot change ownership during your life or be jointly owned, and generally pass by beneficiary designation, not by a will.

IRAs require their own planning, and those plans should be integrated within the overall estate plan. Speak with your estate planning attorney, CPA and financial advisor about tackling this.

As far as taxes are concerned, an IRA may be subject to double tax at death. Both income taxes and possibly estate taxes may apply. For example, if you were to IRAsinherit an IRA from your father at his death he has a taxable estate, the IRA may be subject to estate tax and income tax. However, as the beneficiary, you may be entitled to a special deduction. These special deductions can offset some of the otherwise taxable distributions from that IRA. This deduction is easy to miss because you and the Executor of the Estate must coordinate your tax planning.

Jul 11, 2018 | Articles

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