Retire Safe & Tax Free - Who Inherits Your IRA? Part 3

savings bag

A Legacy of Income

Since the IRS began embracing the concept of stretching distributions, IRA owners can now create a legacy of income for their children and grandchildren. Remember a Multigenerational IRA may be used for IRA, 401(k), 403(b) and SEP-IRA funds. So why hasn't MGIRA planning caught on like wildfire?

A Real World Example

In a real world example, a California teacher worked her whole life to amass $1.2 million and died six months after she retired. Because her paperwork had not been reviewed and her beneficiaries were improperly designated, the beneficiaries received a total of $500,000 while the other $700,000 went to the government in the form of state and federal taxes.

Had the beneficiaries been able to keep the IRA's tax-advantaged status, they could have received approximately $3 million in IRA distributions over their lifetime. Do not assume that legal documents such as wills and trusts will take the place of a properly completed beneficiary designation-they will not and they do not.

So, beware of potential pitfalls.

There are two things that can destroy your good intentions in distribution planning: your beneficiaries and your IRA Custodian, or the financial institution where your investments are.

Uninformed beneficiaries may lose out on thousands of dollars. They may not be aware of the wonderful opportunities that a Multigenerational IRA could mean for them financially. Please have that discussion with them! Even if you think it may be uncomfortable, what is a little discomfort compared to gaining thousands or perhaps millions in potential distributions?

What if your IRA Custodian does not allow a Multigenerational IRA strategy? Many financial service institutions allow beneficiaries to use Multigenerational distributions over the individual life expectancy of each named beneficiary. Unfortunately, not all of them do. The IRA Plan Documents will include provisions or language that describes the permissible distribution options for beneficiaries.

If you have questions, then you should possibly give me a call and I look forward to it! What do you think?

Contact: Marc H. Weiss, Archer Weiss Insurance and Financial Services

(818) 610-8560