Inherited IRA

Recently, the Senate Finance Committee suggests that all the heirs to take all the money from the IRA succeeded within five years from the date of death of the original account holder. This proposal was abandoned shortly thereafter, which would change the current system that allows the user to stretch the withdrawals from the inherited IRA in your own life expectancies, which has assets in the inherited IRA to grow tax-deferred for decades.

Many times in this estate planning, the owner of the account beneficiary designation will be his or her revocable trust. The problem is that the plain vanilla life I can ask for full payment of the IRA within five years. This is because the trust is not considered a person, so there is no life and can not take the opportunity to stretch the withdrawal over a decade. In recent years, there have been some IRS regulations allow the trust to be seen as water or "clear" trust for that purpose. This means that the trust only time to final beneficiaries of the trust, which allows the IRA trustee to pass through to customers in the inherited IRA accounts that are titled in the name of the late f / b / o each individual user names. Each user then has the ability to postpone the withdrawal from an IRA for a long time. It is important to have confidence in the appropriate language to show that the trust qualifies as a "see-through" trust.

In the event that the IRA is taxed in the deceased estate, a federal estate tax is paid, then the IRA beneficiary can receive tax credits paid for the property tax paid on the IRA in value, although the property tax paid. It is important for users to ask whether the federal estate tax on that amount. In this current year, the size of the property should not exceed $ 5,120,000 for the effect of taxation. If Congress does not act until the end of 2012, the federal exemption will return to $ 1.0 million, resulting in more taxable property.

In the case of wealthy adult children, May they be able to disclaim an inherited IRA, thus passing it on to their children. Disclaimer of Liability must be made within nine months from the date of death of the account holder.

This area is so complex that you need to consult a lawyer experienced in this area will be properly guided through the morass of tax issues.

Denice Gierach is a lawyer and owner of Gierach Law in Naperville. She is a certified public accountant and has a master's degree in management.