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Leaving retirement savings to your spouse

A few weeks ago, we covered some benefits of Roth IRAs to the estate planning process. We know that many financial planners promote matching IRA savings and lifestyles, making it so that you spend most of your retirement savings during your retirement. It does make sense: You saved for decades so you could enjoy these golden years, so if you have the savings, why wouldn't you travel or enjoy new hobbies?

Often, however, people do pass away with at least some amount in their IRA. It's kind of hard to predict life down to the nickel. What happens when you pass away with money still left in a regular -- not a Roth -- IRA? If you have a surviving spouse, there's good news.

Lawmakers realized that many people might have leftover amounts in their IRAs when they pass away and that spouses should be able to receive those funds. Thus, the rules for IRAs accommodate easy transfer from a deceased spouse's estate to a living spouse. The funds aren't taxed extra, but simply roll right into the surviving spouse's IRA. There, they are treated exactly like the other funds in the person's account. This does mean it's a good idea for both spouses to have their own IRA accounts.

Spouses can use other rules to inherit funds from an IRA. These rules are also involved when the heir is not a surviving spouse. Often, though, they result in added tax burdens or require someone to take out the amount within a five year span of time.

If you are planning to include IRAs in your future financial planning, it's a good idea to know how they might impact your estate and heirs. Consider speaking to an estate planning lawyer about how to best transfer your assets to others upon your death.

Source: The Motley Fool, "Inherited IRA Rules: What Heirs Need to Know," Dan Caplinger, accessed Dec. 30, 2016

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