Page 18 - Talk of Tequesta - January '24

Page 18, The Talk Of Tequesta

fiNaNCial foCus ®

Don’t Leave Your IRA To The IRS

By Sally Sima Stahl

If you’ve invested in an The tax and investment issues surrounding inherited Massachusetts through Edward Jones Insurance Agency
IRA for many decades, it IRAs can be complex, so consult with your tax and of California, L.L.C.; Edward Jones Insurance Agency of
may well turn into a key financial advisors before making any moves. And, as with New Mexico, L.L.C.; and Edward Jones Insurance Agency
source of income for your many areas relating to inheritances, the sooner you start of Massachusetts, L.L.C.
retirement. Still, you might planning, the better. Edward Jones, its employees and financial advisors
not deplete your IRA in This article was written by Edward Jones for use by cannot provide tax advice. You should consult your
your lifetime, especially if your local Edward Jones Financial Advisor, Edward qualified tax advisor regarding your situation.
you also have a pension or a Jones, Member SIPC. Contact us at (561) 748-7600, Sally Sima Stahl, AAMS,
401(k) and other investment Edward Jones is a licensed insurance producer in 1851 W. Indiantown Road, Ste. 106, Jupiter, FL 33458.
income. So, if your IRA still all states and Washington, D.C., through Edward D.
has sizable assets after your Jones & Co., L.P., and in California, New Mexico and
passing, it would likely end
up in your estate plan. If you leave your IRA to grown
children or other family members, could they be hit with
a big tax bill? iT’s The law
Here’s a little background: Up until the Secure Act of
2019, those who inherited traditional IRAs could extend
their required withdrawals over their lifetimes, which
stretched out the annual taxes due on these withdrawals. Did You Know That, In Florida…
But the Secure Act changed the provisions for non-spouse
beneficiaries who inherited an IRA after 2019, meaning
that beneficiaries of inherited IRAs had only 10 years By Adam S. Gumson, Esq.
(beginning the year after death) to withdraw the entire
balance. For some beneficiaries, this could potentially Major life changes reflect that you reside in Florida. You’ll also want to
create a tax burden. (Inheritors of Roth IRAs are also (such as getting married, update your estate planning documents to reflect Florida
required to follow the 10-year distribution rule but are not divorced or remarried, law and avoid the probate process.
subject to income taxes on account earnings if the Roth children becoming adults, Florida law provides for limited or plenary adult
IRA’s five-year holding period has been met.) financial or residency guardianship. Limited means that the court finds that
However, not all beneficiaries were affected by the new changes) should trigger the ward is able to do some tasks necessary to care for
rules. Spouses can stretch their inherited IRA distributions a review of your estate his/her person or property. Plenary means the ward is
over their lifetimes and exceptions exist for certain non- planning documents. It’s unable to do anything for him/herself and is in need
spouse beneficiaries. Minor children of the IRA owner also a good idea to review of total care. The court’s objective is to establish the
(until the age of majority), chronically ill or disabled them every few years to least restrictive form of guardianship as is necessary
individuals, and beneficiaries who are no more than 10 ensure they still protect you to protect the ward. A guardianship can be terminated
years younger than the IRA owner may opt to stretch their the way you intended. when a ward has become “sui juris” (or, if a minor, has
distributions. If seeking a child support modification, it must be reached the age of majority) or his/her capacity has been
The new 10-year requirement applies to IRAs inherited based upon a “substantial change of circumstances” restored.
on or after Jan. 1, 2020. But due to confusion over changes relative to the difference between the parties’ present Jupiter Law Center is a private neighborhood law
to required minimum distribution (RMD) rules for some financial circumstances and the situation that existed firm located in the RiverPlace Professional Center,
beneficiaries of inherited IRAs, the IRS waived penalties at the time of the entry of the final judgment. 1003 W. Indiantown Road, Suite 210, Jupiter, Fla.,
for individuals who failed to take RMDs in 2021 and 2022 If you are a snowbird with a Florida home, and (561) 744-4600, jupiterlawcenter.com. The firm
and extended the RMD penalty waiver for 2023. are considering making Florida your domicile, it’s provides peace of mind by solving problems with
Although these rulings give beneficiaries – those not important to know that you must spend the majority integrity and compassion in the areas of estate and
eligible for the exemptions listed above – more time to of time in Florida (i.e., at least 183 days). You likely business planning, probate, guardianship and trust
plan, they will eventually need to start taking RMDs, should take other steps, such as updating your mailing administration, probate and guardianship for personal
which could affect their tax situations. To help protect address, driver’s license and voter registration so as to injury firms, family law and real estate.
your heirs, consider these suggestions.
• Using permanent life insurance. A properly structured
permanent life insurance policy could help you replace the
assets your family might lose to the taxes resulting from an
inherited IRA. You might even consider naming a charity
as the beneficiary of an IRA, rather than your family
members. The charity would receive the IRA proceeds tax
free, and the life insurance could then provide tax-free
benefits to your heirs.
• Leaving taxable investment accounts to your heirs.
Apart from your tax-deferred IRA, you may own other, fully
taxable accounts containing investments such as stocks or
bonds. Typically, these investments receive what’s known
as a “step-up” in their cost basis once they are inherited.
This means your heirs will essentially inherit all the gains
your investments earned by the time of your passing – but
they won’t be taxed on these gains if they sell the assets
immediately. This type of sale could help offset the taxes
your heirs will incur from the inherited IRA.

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