The Adams Law Firm, P.A.
FloridA Estate planning, Florida Probate & Guardianship
(407) 270-3724
Florida IRA Trust
Individual retirement accounts (IRAs) are most often thought of as tax-deferred accounts.
It is imperative to understand the basic rules and goals of IRAs before discussing their nuances. IRAs have always presented special estate planning challenges due to ownership restrictions. An IRA owner cannot give the IRA away intact during his or her lifetime.
Estate taxes are different from, and in addition to, income taxes. When you die, your estate must pay estate taxes if its net value (including your tax-deferred IRA accounts and other retirement plan accounts) is more than the amount exempt at that time.
You can change your beneficiary of your IRA at any time while you are living, and the distributions after you die will be paid over that beneficiary's life expectancy (unless they cash out) as a beneficiary's stretch IRA.
It is very important to name both primary and contingent beneficiaries of the IRA while you are living to allow for greater flexibility and "clean up" after your death. For example, your spouse could disclaim some benefits from the IRA so a grandchild could inherit the IRA instead and get a longer stretch IRA. No new beneficiaries of an IRA can be added after you die (unless your spouse names new ones with a rollover IRA), so make sure you include all appropriate beneficiaries of the IRA when you complete the beneficiary designation forms.
Questions and Answers on Florida IRA Trust:
Q: Who can I name as a Beneficiary to my IRA?
A: You have five basic options for naming a beneficiary of your IRA: your spouse, if married; your children, grandchildren or other individuals; a trust; a charity; or some combination of the above.
Q: What if I don't name a beneficiary to my IRA?
A: You will lose control of the distribution of the IRA at your death. The money may go to your estate, requiring probate, or to beneficiaries you may not prefer.
Q: Will my beneficiaries be liable for income taxes after receiving my IRA?
A: Yes. They will pay taxes at their normal tax rate, unless you create stretch IRA that may allow the IRA to continue to accrue tax free during the beneficiary's lifetime.