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Finances And The Future

How can New Jersey heirs get the most out of an IRA?

| May 6, 2014 | Heirs & Beneficiaries

New Jersey residents often hear that it is important to keep beneficiary designations up to date on retirement accounts such as an IRA. However, not as much attention is given to making that designation in a way that helps heirs get the most out of the account. Below are two ways for an account holder to control how an heir will receive distributions from the account.

A handful of banking institutions offer what is called a “trusteed IRA.” In this type of IRA, also known as an Individual Retirement Trust, the bank serves as the trustee. Distributions will be made by in accordance with the account holder’s wishes. Each beneficiary can receive a portion of the account, and when each individual reaches a stipulated age, the entire amount can be distributed. At least one distribution must be made by Dec. 31 of the year after the year of the account holder’s death.

Of course, it does not matter what banking institution an IRA is used to make a trust the beneficiary of the IRA. The trust into which the account proceeds will go must be set up carefully to ensure that it is in compliance with IRS regulations. Otherwise, the account will need to be completely distributed within five years from the date that the account holder passes away. The assets of the trust can then be distributed in accordance with the grantor’s intentions.

Most New Jersey residents want to provide for their family after death. An individual’s estate plan can be structured to ensure the assets left behind will carry heirs through as many years as possible. A working knowledge of the estate planning laws can help determine the best way to accomplish those goals, depending on an individual’s unique circumstances.

Source: MarketWatch, “Protect your heirs from an IRA tax trap”, Glenn Ruffenach, April 28, 2014

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