How to Avoid Common IRA Errors

March 15, 2023

To help you sidestep some of the most common blunders and get the most out of your IRA investments, Kiplinger’s recent article entitled “Don’t Make These Common IRA Mistakes” points out how to avoid the most common IRA errors.

Not Planning for the “Second Half”. It’s really about two halves. You accumulate wealth in the first half and withdraw it in the second. Many people only play the first half of the game: they focus only on saving as much as possible in their IRA account. However, with retirement saving, it’s not how much you have. It’s how much you can keep after taxes.

Converting to a Roth All at Once. If you think your tax rate will be higher when you retire than it is right now, converting a traditional IRA to a Roth IRA this year might be smart. In the end, the total tax you owe on those funds may be lower by taking that step. However, a Roth conversion has a tax bill on your next return. The “mistake” those people sometimes make is thinking they have to convert the entire account at once. Instead, you can do partial conversions.

Exceeding Roth IRA Income Limits. There are annual contributions limits for both traditional IRAs and Roth IRAs. However, for Roth IRAs only, there are also income limits. If you’re single, the amount you can contribute to a Roth IRA account in 2022 is gradually reduced to zero, if your modified adjusted gross income is between $129,000 and $144,000 ($204,000 to $214,000 for joint filers).

Doing Indirect Rollovers. Many people have trouble when they attempt to move money from one retirement account to another. If you take money out of an IRA account and the check is in your name, you only have 60 days to roll that money over into another retirement account before the withdrawn funds are deemed taxable income. This is an indirect rollover. For IRA-to-IRA transfers, you can only do one indirect rollover per year.

Forgetting to Account for All RMDs. You must start taking required minimum distributions (RMDs) when you reach 72. Some people miss an RMD or don’t take it for all of their accounts subject to the RMD rules. Other people miscalculate and don’t withdraw enough money. These can be costly mistakes, because you could be hit with a stiff penalty for violating the RMD rules.

These are simply the most common IRA errors to avoid, but there can be additional issues that you need to be aware of. Take the time out to consult with your financial advisor and your estate planning attorney to make sure you are covered. If you would like to learn more about retirement accounts, please visit our previous posts.

Reference: Kiplinger (July 25, 2022) “Don’t Make These Common IRA Mistakes”

Steps Seniors should take before Remarrying

March 6, 2023

Seniors in particular think about remarrying with an understandable degree of concern. Maybe your last relationship ended in a divorce, or there’ve been too many dating disasters. However, according to a recent article from MSN, “Planning to remarry after a divorce? 6 tips to protect your financial future,” there are some steps seniors should take before remarrying to make relationships easier to navigate and protect your financial future.

Not all of them are easy, but all are worthwhile.

No marrying without a prenup. Who wants to think about divorce when they’re head-over-heels in love and planning a wedding? No one. However, think of a prenup as about the start, not the end. It clarifies many issues: full financial clarity, financial expectations and clear details on what would happen in the worst case scenario. Getting all this out in the open before you say “I do” makes it much easier for the new couple to go forward.

Trust…but verify. Estate planning ensures that assets pass as you want. A revocable living trust set up during your lifetime can be used to ensure your assets pass to your offspring. Unlike a will, the provisions of a revocable trust are effective not just when you die but in the event of incapacity. A living trust can provide for the trust creator and their children during any period of incapacity prior to death. At death, the trust ensures that beneficiaries receive assets without going through probate.

Consider life insurance. Life insurance, possibly held in an irrevocable life insurance trust (ILIT), which allows proceeds to pass tax-free, can be used to provide funds for a surviving spouse or children from a prior marriage. Make sure to review all insurance policies, including life, property and casualty and umbrella insurance to be sure you have the correct coverage in place, insurance policies are titled correctly and premiums continue to be paid.

Estate planning. While you are planning to remarry is a good time to check on account titles, beneficiary designations and powers of attorney. Couples should review their estate plans to be sure planning reflects current wishes. Married couples have the benefit of the unlimited marital deduction, meaning they can gift during their lifetime or bequeath at death an unlimited amount of assets to their U.S. citizen surviving spouse without any gift or estate tax. For unmarried couples, different estate planning techniques need to be used to pass the maximum amount to partners tax free.

Check beneficiaries. After divorce and before a remarriage, check beneficiaries on 401(k)s, pensions, retirement accounts and life insurance policies, Power of Attorney and Health Care Power of Attorney documents. If you remarry, a prenup agreement or state law may require you to give some portion of your estate to your spouse, so have an estate planning attorney guide you through any changes. Couples should also check beneficiaries of life insurance and retirement plans.

Choose trustees wisely. Consider the advantages of a corporate trustee, who will be neutral and may prevent tensions with a newly blended family. If an outsider is named as an executor, or to act as a trustee, they may be able to minimize conflict. They’ll also have the professional knowledge and expertise with legal, tax and administrative complexities of administering estates and trusts.

These are just some of the major steps seniors should take before remarrying. Sit down and discuss the implications on you planning with your estate planning lawyer. If you would like to learn more about remarriage protection, please visit our previous posts.

Reference: MSN (Feb. 11, 2023) “Planning to remarry after a divorce? 6 tips to protect your financial future”

Consider Annuities in your Estate Planning

March 2, 2023

Many people have annuities tied to their retirement accounts. It might be wise to consider annuities in your estate planning. Annuities are contracts between you and an insurance company, which is unlike retirement investment accounts like 401(k)s or individual retirement accounts (IRAs).

Forbes’ recent article entitled “What Is An Annuity Beneficiary?” explains that, with an annuity, you make a lump sum payment or a series of payments over a set period to the insurance company. In exchange, the insurance company will pay out a stream of income in retirement or at a predetermined future date, depending on the type of annuity purchased.

There are a number of benefits to annuities, such as a predictable income in retirement, tax-deferred growth and a death benefit if you pass away. There are several different types of annuities, but they can be grouped into three main categories:

Fixed annuity. If you buy a fixed annuity, the insurance company will pay you a minimum rate of interest and a fixed amount of periodic payments. These are the safest type of annuity because you know the minimum you’ll earn.
Indexed annuity. This combines features of annuities and investment securities. The insurance company’s payments are based on the performance of a stock market index, such as the S&P 500. When the index performs well, the value of the indexed annuity increases. However, it can also decline along with the index’s performance.
Variable annuity. With this type of annuity, you can use your annuity payments for investment products, like mutual funds. Your payout is based on the performance of how much you invest and the rate of return on those securities. These annuities can be risky. However, they have the potential for higher returns.

Whoever signs an annuity contract is considered the owner, who selects the way the annuity will be funded, how payouts will be made and the recipient of the payouts. They also name beneficiaries, control withdrawals and have the power to cancel the contract. An “annuitant” is the person who gets income payments from an annuity contract.

Some annuities have death-benefit provisions, so you can name someone to inherit the remaining annuity payments if you die before it’s been fully paid. The designated recipient of that benefit is known as the annuity beneficiary.

The death benefit of an annuity is typically the remaining contract value or the amount of premiums, minus any withdrawals, upon the annuity holder’s death. Discuss with your estate planning attorney whether or not you should consider annuities as part of your estate planning strategy. If you would like to learn more about annuities and how they work, please visit our previous posts.

Reference: Forbes (Jan. 19, 2023) “What Is An Annuity Beneficiary?”

Naming a Secondary Beneficiary is critical

February 10, 2023

Naming a secondary beneficiary is critical to ensuring your assets go where you want them. A secondary beneficiary, sometimes called a contingent beneficiary, is a person or entity entitled to receive assets from an estate or trust after the estate owner’s death, if the primary beneficiary is unable or unwilling to accept the assets. Secondary beneficiaries can be relatives or other people, but they can also be trusts, charities or other organizations, as explained in the recent article titled “What You Need to Know About Secondary or Contingent Beneficiaries” from yahoo! life.

An estate planning lawyer can help you decide whether you need a secondary beneficiary for your estate plan or for any trusts you create. Chances are, you do.

Beneficiaries are commonly named in wills and trust documents. They are also used in life insurance policies and in retirement accounts. After the account owner dies, the assets are distributed to beneficiaries as described in the legal documents.

The primary beneficiary is a person or entity with the first claim to assets. However, there are times when the primary beneficiary does not accept the assets, can’t be located, or has predeceased the estate owner.

A secondary beneficiary will receive the assets in this situation. They are also referred to as the “remainderman.”

In many cases, more than one contingent beneficiary is named. Multiple secondary beneficiaries might be entitled to receive a certain percentage of the value of the entire estate. More than one secondary beneficiary may also be directed to receive a portion of an individual asset, such as a family home.

Estate planning attorneys may even name an additional set of beneficiaries, usually referred to as tertiary beneficiaries. They receive assets if the secondary beneficiaries are not available or unwilling to accept the assets. In some cases, estate planning attorneys name a remote contingent beneficiary who will only become involved if all of the primary, secondary and other beneficiaries can’t or won’t accept assets.

For example, a person may specify their spouse as the primary beneficiary and children as secondary beneficiaries. A more remote relative, like a cousin, might be named as a tertiary beneficiary, while a charity could be named as a remote contingent beneficiary.

Almost any asset can be bequeathed by naming beneficiaries. This includes assets like real estate (in some states), IRAs and other retirement accounts, life insurance proceeds, annuities, securities, cash and other assets. Secondary and other types of beneficiaries can also be designated to receive personal property including vehicles, jewelry and family heirlooms.

Naming a secondary beneficiary is critical to ensuring that your wishes as expressed in your will are going to be carried out even if the primary beneficiary cannot or does not wish to accept the inheritance. Lacking a secondary beneficiary, the estate assets will have to go through the probate process. Depending on the state’s laws, having a secondary beneficiary avoids having the estate distribution governed by intestate succession. Assets could go to someone who you don’t want to inherit them!

Talk with your estate planning attorney about naming secondary, tertiary and remote beneficiaries. If you would like to learn more about beneficiaries, please visit our previous posts.

Reference: yahoo! life (Jan. 4, 2023) “What You Need to Know About Secondary or Contingent Beneficiaries”

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Prevent some Common Beneficiary Errors

January 19, 2023

Planning for one’s eventual death can be a somber task. However, consider what would occur if you failed to plan: loved ones trying to figure out your intentions, a long and expensive legal battle with unintended heirs and instead of grieving your loss, wondering why you didn’t take care of business while you were living. Planning suddenly becomes far more appealing, doesn’t it? There are ways to prevent some common beneficiary errors.

A recent article from yahoo! finance, “5 Retirement Plan Beneficiary Mistakes to Avoid,” explains how to avoid some of the issues regarding beneficiaries.

You haven’t named a beneficiary for your retirement accounts. This is a common estate planning mistake, even though it seems so obvious. A beneficiary can be a person, a charity, a trust, or your estate. Your estate planning attorney will be able to help you identify likely beneficiaries and ensure they are eligible.

You forgot to review your beneficiary designations for many years. Most people have changes in relationships as they move through the stages of life. The same person who was your best friend in your twenties might not even be in your life in your sixties. However, if you don’t check on beneficiary designations on a regular basis, you may be leaving your retirement accounts to people who haven’t heard from you in decades and disinheriting loved ones. Every time you update your estate plan, which should be every three to five years, check your beneficiary designations.

You didn’t name your spouse as a primary beneficiary for a retirement account. When Congress passed the 2019 SECURE Act, the bill removed a provision allowing non-spousal beneficiaries to stretch out disbursements from IRAs over their lifetimes, also known as the “Stretch IRA.” A non-spouse beneficiary must empty any inherited IRA within ten years from the death of the account holder. If a minor child is the beneficiary, once they reach the age of legal majority, they are required to follow the rules of a Required Minimum Distribution. Having a spouse named as beneficiary allows them to move the inherited IRA funds into their own IRA and take out assets as they wish.

You named an estate as a beneficiary. You can name your estate as a beneficiary. However, it creates a significant tangle for the family who has to set things right. For instance, if you have any debt, your estate could be attached by creditors. Your estate may also go through probate court, a court-supervised process to validate your will, have your final assets identified and have debts paid before any remaining assets are distributed to heirs.

You didn’t create a retirement plan until late in your career. Retirement seems very far away during your twenties, thirties and even forties. However, the years pass and suddenly you’re looking at retirement without enough money set aside. Creating an estate plan early in your working life shifts your focus, so you understand how important it is to have a retirement plan.

An experienced estate planning attorney can help you prevent some common beneficiary errors as part of your overall estate plan. The best time to start? How about today? If you would like to learn more about beneficiary designations, please visit our previous posts.

Reference: yahoo! finance (Dec. 19, 2022) “5 Retirement Plan Beneficiary Mistakes to Avoid”

SECURE 2.0 Act has New Features

January 18, 2023

SECURE 2.0 Act of 2022 is an extension of the original SECURE Act, which was enacted in 2019, reports Forbes’ recent article, entitled “SECURE 2.0 Passes—Here’s What It Means To Your Retirement.” An American Retirement Association press release notes the Secure 2.0 Act has new features including:

A Starter 401(k)—that could provide more than 19 million new American workers with access to the workplace-based retirement system through a brand new super simple, safe harbor 401(k) plan
A 100% tax credit for new plans to incentivize the creation of new workplace retirement programs by small businesses; and
A Saver’s Match Program that would incentivize retirement savings by giving a 50% match on up to $2,000 in retirement savings annually for lower- and middle-income Americans.

About 108 million Americans would be eligible for the Saver’s Match that would be directly deposited into their retirement account—upping the savings of moderate-income earners.

“We are grateful to the many members of Congress and staff who worked tirelessly to get SECURE 2.0 included in the omnibus legislation enacted this week,” noted Brian Graff, CEO of the American Retirement Association in Washington, DC.

“This important legislation will enhance the retirement security of tens of millions of American workers—and for many of them, give them the opportunity for the first time to begin saving.”

The Pension Protection Act of 2006 first introduced the concept of automatic 401(k) enrollment. This shifted the then-current 401(k) practice of requiring workers to opt-in before being allowed to participate in their company’s 401(k) plan to requiring them to opt-out only if they did not want to participate.

The new legislation now has a number of provisions meant to encourage companies to create retirement savings plans for their workers.

For older workers who find themselves behind in their savings, SECURE 2.0 grants them higher “catch-up” provisions. The new features in the Secure 2.0 Act may be a benefit to you or your loved ones. If you would like to learn more about the SECURE Act, please visit our previous posts.

Reference: Forbes (Dec. 23, 2022) “SECURE 2.0 Passes—Here’s What It Means To Your Retirement”

Qualified Charitable Distributions Reduce Tax Burden

January 16, 2023

Assets held in Individual Retirement Accounts (IRAs) are unquestionably the best assets to gift to charity, since IRAs are loaded with taxes. One way to relieve this tax burden is by using the IRA for charitable giving during your lifetime, says a recent article, “Giving funds in IRAs to charity with QCDs,” from Investment News. Qualified charitable distributions can help reduce your tax burden.

Most people who give to charity don’t receive the taxable benefit because they don’t itemize deductions. They instead use the higher standard deduction, which offers no extra tax deduction for charitable giving.

Older taxpayers are more likely to use the standard deduction, since taxpayers aged 65 and older receive an extra standard deduction. In 2022, the standard deduction for a married couple filing jointly when each of the spouses are 65 and older is $28,700. The exceptions are couples with large medical expenses or those who make large charitable gifts.

Here’s where the IRA for charitable giving comes in. IRAs normally may not be given to charity or anyone in the owner’s life (except in the case of divorce). There is one exception: giving IRAs to charity with a QCD.

The QCD is a direct transfer of traditional IRA funds to a qualified charity. The QCD is an exclusion from income, which reduces Adjusted Gross Income. AGI is the most significant number on the tax return because it determines the availability of many tax deductions, credits and other benefits. Lowering AGI with a QCD could also work to reduce “stealth” taxes–taxes on Social Security benefits or Medicare premium surcharges.

QCDs are limited to $100,000 per person, per year (not per IRA). They can also satisfy RMDs up to the $100,000, but only if the timing is right.

There are some limitations to discuss with your estate planning attorney. For instance, QCDs are only available to IRA owners who are 70 ½ or older. They can only be made once you turn age 70 ½, not anytime in the year you turn 70 ½. The difference matters.

QCDs are not available from 401(k) or other employer plans. They also aren’t allowed for gifts to Donor Advised Funds (DAFs) and private foundations, and they can’t be made from active SEP or SIMPLE IRAs, where contributions are still being made.

Appreciated stocks can also be gifted to qualified charities and itemized deductions taken for the fair market value of the stock, if it was held for more than one year. There’s no tax on appreciation, as there would be if the stock were sold instead of gifted.

There are some tax traps to consider, including the SECURE Act, which allows traditional IRAs to be made after age 70 ½. However, it pairs the provision with a poison pill. If the IRA deduction is taken in the same year as a QCD, or any year before the QCD, the QCD tax exclusion could be reduced or lost. This can be avoided by making Roth IRA contributions instead of tax-deductible IRA contributions after age 70 ½.

Speak with your estate planning attorney about whether using qualified charitable distributions to help reduce your tax burden makes sense for your estate planning and tax situation. If you would like to learn more about charitable giving, please visit our previous posts.

Reference: Investment News (Dec. 9, 2022) “Giving funds in IRAs to charity with QCDs”

Preparing an Estate Inventory is Critical

January 9, 2023

The executor’s job includes gathering all of the assets, determining the value and ownership of real estate, securities, bank accounts and any other assets and filing a formal inventory with the probate court. Preparing an estate inventory is critical to having a smooth probate. Every state has its own rules, forms and deadline for the process, says a recent article from yahoo! Finance titled “What Do I Need to Do to Prepare an Estate Inventory for Probate,” which recommends contacting a local estate planning attorney to get it right.

The inventory is used to determine the overall value of the estate. It’s also used to determine whether the estate is solvent, when compared to any claims of creditors for taxes, mortgages, or other debts. The inventory will also be used to calculate any estate or inheritance taxes owed by the estate to the state or federal government.

What is an estate asset? Anything anyone owned at the time of their death is the short answer. This includes:

Real estate: houses, condos, apartments, investment properties
Financial accounts: checking, savings, money market accounts
Investments: brokerage accounts, certificates of deposits, stocks, bonds
Retirement accounts: 401(k)s, HSAs, traditional IRAs, Roth IRAs, pensions
Wages: Unpaid wages, unpaid commissions, un-exercised stock options
Insurance policies: life insurance or annuities
Vehicles: cars, trucks, motorcycles, boats
Business interests: any business holdings or partnerships
Debts/judgments: any personal loans to people or money received through court judgments

Preparing an estate inventory is critical for probate, but it may take some time. If the decedent hasn’t created an inventory and shared it with the executor, which would be the ideal situation, the executor may spend a great deal of time searching through desk drawers and filing cabinets and going through the mail for paper financial statements, if they exist.

If the estate includes real property owned in several states, this process becomes even more complex, as each state will require a separate probate process.

The court will not accept a simple list of items. For example, an inventory entry for real property will need to include the address, legal description of the property, copy of the deed and a fair market appraisal of the property by a professional appraiser.

Once all the assets are identified, the executor may need to use a state-specific inventory form for probate inventories. When completed, the executor files it with the probate court. An experienced estate planning attorney will be familiar with the process and be able to speed the process along without the learning curve needed by an inexperienced layperson.

Deadlines for filing the inventory also vary by state. Some probate judges may allow extensions, while other may not.

The executor has a fiduciary responsibility to the beneficiaries of the estate to file the inventory without delay. The executor is also responsible for paying off any debts or taxes and overseeing the distribution of any remaining assets to beneficiaries. It’s a large task, and one that will benefit from the help of an experienced estate planning attorney. If you would like to learn more about probate, please visit our previous posts.

Reference: yahoo! finance (Dec. 3, 2022) “What Do I Need to Do to Prepare an Estate Inventory for Probate”

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Managing your Inherited Retirement Account

October 25, 2022

The SECURE Act of 2019 reset the game for IRAs and other tax deferred retirement accounts, says a recent article from Financial Advisor titled “IRAs, Taxes and Inheritance: Planning Becomes a Family Affair.” Managing your inherited retirement account can be tricky. Prior to SECURE, investors paid ordinary income tax rates on withdrawals, whether they were voluntary or Required Minimum Distributions (RMDs) from these accounts, except for Roths. When individuals stopped working and their income dropped, so did the tax rate on their withdrawals. All was well.

Then the SECURE Act came along, with good intentions. The time period for payouts of IRAs and similar accounts after the death of the account owner changed. Non-spouse beneficiaries now have only 10 years to empty out the accounts, setting themselves up for potentially huge tax bills, possibly when their own incomes are at peak levels. What can be done?

Heirs of individual investors or couples with hefty IRAs and investment accounts are most likely to face consequences of the new tax regulations for RMDs and inheritances from the SECURE Act.

A widowed spouse faces the lower of either their own or the partner’s RMD rate—it’s tied to birth years. However, there is a pitfall: the widowed spouse files a single tax return, which cuts available deductions in half and changes tax brackets. Single or married, consider accelerating IRA withdrawals as soon as taxable income lowers early in retirement. Taking withdrawals from IRAs at this time voluntarily often means the ability to defer and as a result, optimize Social Security benefits to age 70.

For non-spousal beneficiaries of inherited IRAs, there’s no way around that 10-year rule. Their tax rates will depend on income, whether they file single or joint and any deductions available. If a beneficiary dies while the account still owns the assets, those assets may be subject to estate taxes, which are high.

Here’s where tax planning is could help. IRA owners may try to “equalize” inheritances among heirs with tax consequences in mind. For instance, a lower earning child could be the IRA beneficiary, while a higher earning child could receive assets from a brokerage account or Roth IRAs. Alternatively, an IRA owner could establish trusts or make charitable bequests to empty the IRAs before they become part of the estate.

Your estate planning attorney will help you create a road map for distributing IRA and other tax deferred assets based on the tax and timing for beneficiaries or what you want to fund after you pass.

Another strategy, if you don’t expect to exhaust your IRA assets in your lifetime, is to systematically withdraw money early in retirement to fund Roth IRAs, known as a Roth conversion. The advantage is simple: inherited Roth IRAs need to be drawn down in ten years, but the money isn’t taxable to beneficiaries.

Decumulation planning is complicated to do. However, your estate planning attorney will help you manage your inherited retirement account. He or she will evaluate your unique situation and create the optimal income sourcing plan for your family based on their assets, including taxable and tax-advantaged accounts, Social Security benefits, pensions, life insurance and annuities. If you would like to learn more about retirement accounts and estate planning, please visit our previous posts.

Reference: Financial Advisor (Sep. 29, 2022) “IRAs, Taxes and Inheritance: Planning Becomes a Family Affair”

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IRAs can be used to make Charitable Bequests

October 3, 2022

While death is a certainty, some taxes aren’t. IRAs can be used to make charitable bequests, explains a thought-provoking article titled “Win an Income-Tax Trifecta With Charitable Donations” from The Wall Street Journal. For those who are philanthropically minded and tax-savvy, this is an idea worth consideration.

There are few better ways to leave funds to a charity than through traditional IRAs. The strategy is especially noteworthy now, given the growth in traditional IRA values over the last decade, even with the recent selloffs in bond and stock markets. At the end of 2022’s first quarter, traditional IRAs held about $11 trillion, more than double the $5 trillion in IRAs at the end of 2012.

With the demise of defined benefit pensions, traditional IRAs are now the largest financial account many people own, especially boomers. Therefore, it’s wise to know about applicable tax strategies.

The first advantage is tax efficiency. Donors of IRA assets at death win a three-way tax prize: no tax on the contributions going to the charity, no tax on annual growth and no tax on assets at death.

Compare this to donations of cash or investments, such as a stock held in a taxable account. For example, let’s say Jules wants to leave a total of $20,000 to several charities upon her death. She expects to have more than $20,000 in each of three accounts at this time. One account is cash, the other is a traditional IRA, holding stocks and funds, and the third is a taxable investment account holding stocks purchased decades ago.

A charitable bequest of assets from any of these three accounts will bring a federal estate-tax deduction. However, Jules’ estate will be smaller than the current estate tax exemption of about $12 million, so there are no federal estate taxes to consider.

Jules should focus on minimizing heirs’ income taxes on any assets she’s leaving them and donating traditional IRA assets is the way to go. If she leaves the IRA assets to heirs, they will have to empty the IRA within ten years and withdrawals will be taxable.

Giving IRA assets gets pretax dollars directly to the charities, which don’t pay taxes on the donation. A cash donation would be after tax dollars.

Donating the IRA assets to charity is also typically better than giving stock held in a taxable account. Because of the step-up provision, there is no capital gains on such investment assets held at death. If Jules bought the now $20,000 stock for $5,000, the step-up could save heirs capital gains tax on $15,000 when they sell the shares. If she donates the stock, heirs won’t get this valuable benefit.

Next, IRA donations allow for great flexibility. Circumstances in life change, so a will that is drawn up years before death could be changed over time, to give a bequest of a different size or to a different charity. It’s easier to make these changes with an IRA. One way is to set up a dedicated IRA naming one or more charities as beneficiaries and then moving assets from other IRAs into it via direct (and tax-free) transfers. Beneficiaries and the percentages can be easily changed, and the IRA owner can raise or lower the donation by transferring assets between IRAs.

If the IRA owner is 72 or older and has to take required minimum distributions, the owner can take out donations from different IRAs. Note the funds must go directly to the charity when making the donation. Speak with your estate planning attorney about how IRAs can be used to make charitable bequests. If you would like to learn more about charitable giving, please visit our previous posts.

Reference: The Wall Street Journal (Sep. 2, 2022) “Win an Income-Tax Trifecta With Charitable Donations”

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Category: Retirement Accounts

How to Avoid Common IRA Errors

Steps Seniors should take before Remarrying

Consider Annuities in your Estate Planning

Naming a Secondary Beneficiary is critical

Prevent some Common Beneficiary Errors

SECURE 2.0 Act has New Features

Qualified Charitable Distributions Reduce Tax Burden

Preparing an Estate Inventory is Critical

IRAs can be used to make Charitable Bequests

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