Because so many Americans have a substantial amount of wealth tied up into their retirement savings plans, IRA owners face major issues when it comes to insuring that their beneficiaries’ assets are protected.
Odin, Feldman & Pittleman Trust Estate & Tax attorneys John P. Dedon and Pamela M. Buskirk had their article, “IRA Beneficiary Designations Stretch or Shorten Payout Period”, published in Estate Planning Journal’s February issue. The article focuses on IRA beneficiaries, trusts, and distributions. According to John Dedon, “The financial decisions pertaining to IRAs are complicated. Participants need help determining how to invest their IRA, when to take distributions, how much to withdraw, and whether a Roth conversion makes sense.”
IRA owners have the option of either sticking to a traditional IRA or switching over to a Roth IRA, which allows for tax-free distributions and growth. Once owners have chosen their IRA path, they must then deal with distributions and beneficiaries.
“One issue that IRA owners face is that if they don’t assign a qualified beneficiary to their IRA, that it will automatically be moved to a default five year distribution plan; also referred to as the ‘five-year rule’,” said attorney Pamela Buskirk. This plan requires that all of the IRA assets must be distributed within a five year period of time, starting at the owner’s death. Buskirk continues, “This doesn’t give beneficiaries the maximum amount of money they could receive, because it’s distributed in such a short period of time. An IRA owner should also consider using a qualified trust, and not a person, as their beneficiary.” This will allow the participant to combine asset protection with the benefits of a stretch distribution plan. When an IRA is distributed through a stretch plan, it is spread out over a beneficiary’s lifetime. An IRA owner’s loved ones will more than likely receive the maximum amount of money from the IRA.
John Dedon believes in “the importance of tying one’s IRA planning into an estate plan.” Paying attention to the new IRA 401K rules helps minimize exposure to taxes, and can ensure that an IRA owner’s loved ones will reap the benefits of a well organized and protected retirement savings plan.
For more information visit: www.dedononestateplanning.typepad.com
About Odin, Feldman & Pittleman
Odin, Feldman & Pittleman is a Northern Virginia based law firm with attorneys practicing in litigation, real estate, bankruptcy & creditors’ rights; corporate, securities, tax and finance; family law and domestic relations; labor and employment; technology and intellectual property; trusts, estates and tax planning; arbitration and mediation; banking and finance; and construction law.
Contact: David Novak, +1-703-218-2340, David.Novak@ofplaw.com
CONTACT: David Novak, +1-703-218-2340, David.Novak@ofplaw.com
Web Site: http://www.ofplaw.com
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