IRAs and other types of retirement accounts are perceived by many people as pretty simple plans but, as we have discussed in the past, there are many complexities to IRAs that can cause big problems.
When it comes to inheriting an IRA, the rules and guidelines are more complicated than most people realize. Without proper understanding, an IRA inheritance could spell disaster.
It is not unusual for IRA heirs to not know about or misunderstand some key rules and guidelines. Unfortunately, the IRS does not give much mercy when things are not done properly, even from ignorance of the rules. A wrong move can often cause much of the inherited IRA to end up with the IRS in the form of taxes. Here are some key inherited IRA mistakes that can be disastrous.
Inaccurate Or Wrong Documents – Your will or living trust has no effect on an IRA. IRA owners often make the mistake of having the wrong beneficiaries named or not designating beneficiaries altogether.
Unprepared beneficiaries – A lot of money that is passed on is wasted or blown by unprepared or irresponsible beneficiaries.
Not Knowing About Special Spousal Options – Spousal beneficiaries have special options that are not available to others.
Not Realizing Tax Issues – Most inherited IRA accounts are fully taxable to the beneficiaries. Fortunately, there are ways to minimize these taxes if you make the right moves by the right time.
Inheriting money, specifically IRAs, is a complex process filled with many rules and guidelines. If not understood or followed properly, an inheritance can turn into a disaster.
To learn more about these and other mistakes to avoid, reach out directly at 702-462-7233 or agoodman@AskAdamGoodman.com Investment Advisory Services offered through Brookstone Capital Management LLC, a Registered Investment Advisor. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided by third parties for informational purposes only and is not a solicitation to buy or sell any products mentioned.