by
LAS
Joe
Schmo can leave his IRA to your surviving spouse (Mrs Schmo) or child
(Johnny Schmo), no problem. But doing it right can avoid a big tax
bite. This is according to Jane Bryant Quinn, so if your local
finance advisor is at all confused over how to handle this, tell him
that.
Mr
Joe Schmo has a very fine IRA, but one day he kicked the bucket.
Fortunately he designated Mrs Schmo as his beneficiary.
Mrs
Schmo has to put this IRA in her name. This is called retitling. With
a traditional IRA, she has to leave the money alone until she reaches
age 70 and a half, when the law requires her to start making
withdrawals. (NOTE: With a Roth IRA, you can keep money you do not
need in the IRA for the next generation.)
Mrs
Schmo is under 59 and a half, so this is how she should re-title this
IRA: “Joe Schmo IRA (deceased MO-DAY-YR) for the benefit of Jane
Schmo, beneficiary.”
When
Mrs Schmo reaches 59 and a half, she ought to re-title it once more,
this time in her own name. This has the advantage of allowing her to
let the money accrue value until she need it, or rather when she is
required to make withdrawals at age 70 and a half.
Now,
let's say that a parent leaves the balance of an IRA to an adult
child. The child also has to re-title the IRA. Joe Schmo leaves his
IRA to his only child, Johnny Schmo, so Johnny has to re-title it
like this: “Joe Schmo IRA (deceased MO-DAY-YR) for the benefit of
Johnny Schmo, beneficiary.” (if there are several children, each
one should re-title his or her share of the IRA)
Note
that inherited 401(k)s can also be similarly retitled as an inherited
IRA.
There
is a book out there on this specific topic, “Retire Secure! Pay
Taxes Later” by James Lange.
Posts
