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Home » Resources » Frequently asked questions » IRA Inheritance Planning FAQs

IRA Inheritance Planning FAQs

    • What happens if you don’t need all or some of the money in your individual retirement account?

    • When you establish the account, you name a beneficiary that would become the account owner after you pass away.

    • Do they pay taxes on the distributions?

    • The answer to this question depends on the type of account that you are leaving to a beneficiary. If you have a traditional individual retirement account, you make contributions before you pay taxes on the income.

      This is positive in the near term, because you pay taxes on less income each year. On the flip side, since you made pretax contributions, distributions that you take would be subject to taxation. The same arrangement would apply to the beneficiary of the account.

      On the other hand, if you have a Roth individual retirement account, contributions are made after taxes have been paid. You would not be taxed if you take money out of the account, and the beneficiary would not have to report distributions when they file their income tax returns.

    • Can you let the money accumulate intentionally for inheritance planning purposes?

    • Once again, the answer to this question is different for each respective type of account. You never have to take distributions from a Roth individual retirement account, because the IRS has already gotten their share.

      Mandatory minimum distributions (RMDs) are required if you have a traditional account because the tax man want to start getting some money eventually. Prior to the enactment of the SECURE Act, the age at which you had to take RMDS was 70.5, but it is now 72.

    • How old do you have to be to take distributions?

    • For either type of account, you can take penalty-free distributions when you are 59.5 years of age.

    • Are there any exceptions to this rule?

    • Yes, there are a few exceptions. You can take as much as $10,000 out of the account to help to finance your first home purchase. Penalty free distributions can also be taken to cover unpaid medical bills and school tuition.

    • Can you continue to contribute into the account for an open-ended period of time?

    • There was another change that was included in the SECURE Act that applies to this question. In the past, you had to stop contributing into a traditional account when you reached the mandatory distribution age. Now, you can contribute into the account indefinitely.

      Roth IRA account holders have always been able to contribute into their accounts for open-ended periods of time.

    • Can the beneficiary keep the account open for any length of time?

    • Non-spouse beneficiaries have to take required minimum distributions on an annual basis. Before the SECURE Act was passed, estate planning attorneys used to recommend a strategy called the “stretch IRA.”

      The idea was to take only the minimum that was required by law to maximize the tax-free growth. This strategy was especially useful for Roth individual retirement account beneficiaries because of the fact that the distributions are not subject to regular income taxes.

      This new law has eliminated the long-term stretch IRA. As it now stands, the beneficiary must take all of the assets out of the account within 10 years.

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Client Review
July 29, 2020
    

We need to update our Living Trust and attended Schomer Law Group’s seminar. Afterwards we made an appointment and were impressed by the attention Scott Schomer and Liran Aliav gave to our case answering all questions and making suggestions how to minimize the estate tax. All the office staff is very friendly and we highly recommend Schomer Law Group.

Frank & Jutta R
Client Review
July 29, 2020
    

Mr. Schomer does an amazing job at explaining all the intricacies of establishing a trust. He and his team help you every step of the way so you always know what to expect and what you are preparing for. Best education you can get and the best gift you can give your family.

Paula M.
Client Review
July 29, 2020
    

We put off getting a trust for years. After attending a seminar with Scott Schomer we realized that the time had come to get a trust. We were given very good reasons for why we should get a trust. No pressure, just the plain facts. We are very relieved and happy to finally get our trust. Scott and Cesar were very knowledgeable, helpful and listened to our ideas of what we had to say. Any questions that we have now and in the future they are available to assist us to solve them. I recommend the Schomer Law Group and I wish we knew about them years ago.

Phillip G.
Client Review
July 29, 2020
    

When you’re presented with an invitation to attend in a mailer, you may have reservations, this was a truly gift!! My wife and I were educated and guided through the process of creating a family trust.
Both of our parents had attorney’s that “worked” with wills/trusts, but came up short. Fortunately, the Schomer Law Group was there! This is a group of attorney’s that only specialize in estate planning, law, and financial advice, so you know you’re getting expert and personalized advice. This is the best money we’ve ever spent!! Thank you!

Bob L.
Client Review
July 29, 2020
    

We knew we had to update our 10 year old ( 20 page ) trust. After several detailed meetings, Liran and Cesar produced a large ( 300 pages + ) highly detailed trust document that we have used to make sure our family estate is well managed and clearly understood.
They were all very helpful in answering myriad questions and explaining all the various options…

We would strongly recommend the Schomer Law Group to anyone with an estate of even modest means, to assure proper planning…

Bob S.
Client Review
July 29, 2020
    

We had contemplated updating our will and starting a trust for a number of years. After attending a talk by Scott Schomer we realized we were long overdue and the potential downside of not having our affairs in order was significant. Scott and his excellent team made the process simple and seamless. They were great listeners, addressed all our concerns and even pulled and processed all the paperwork from our financial institutions. If you are looking for assistance with estate planning, wills and trusts, we highly recommend Schomer Law Group.

Robert F.
Client Review
July 29, 2020
    

Very competent & informative – friendly atmosphere – ready to answer the most mundane questions – relaxed.

Joan S.
Client Review
July 29, 2020
    

Mr. Schomer was excellent in getting our family trust and estate affairs in order. My husband and I had put off doing this and Scott really made the process easy! He is very passionate in making sure his clients get all that they need and we really appreciated it. I would highly recommend him and look forward to the many years he will be available to assist our family.

Kim

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