Moynihan Lyons ensures that maximum stretch-out capabilities are contemplated and preserved for IRA beneficiaries. Sophisticated planning incorporates protection to fulfill the settlor’s intent even when the primary beneficiary passes away.
In recent years, IRS rules have expanded the period over which an IRA owner and his or her spouse may take Required Minimum Distributions (RMD’s) and greatly lengthen the period over which a non-spouse beneficiary may now stretch out RMD’s after the owner’s death. The stretch out of RMD’s results in longer tax-deferred compounding inside the IRA and much greater potential family wealth accumulation making IRAs one of your most valuable assets for passing wealth down from generation to generation.
Many parents, and their financial advisors, believe that naming the children as IRA beneficiaries is sufficient to assure the stretch out. They assume the children will properly take only RMD’s or seek assistance from the parent’s financial advisor to make sure the stretch out occurs. However, many beneficiaries decide to cash out the inherited IRA earlier than required, “blowing” the stretch out entirely.
One solution is to use a trust as beneficiary instead of the IRA being paid directly to a beneficiary. Unfortunately, IRS rules make it difficult for the typical family revocable living trust to take advantage of the maximum stretch out based on each beneficiary’s life expectancy, requiring all to use the shortest life expectancy or to cash out in 5 years. Further, there may be, now or in the future, situations when protection is more important for a beneficiary than income-tax stretch out, e.g., a beneficiary undergoing divorce or receiving needs-based government benefits. Attempting to solve these problems with special language in a living trust is rarely satisfactory.
Since September, 2005, a properly drafted stand-alone IRA Designated Beneficiary Trust can be utilized for income-tax stretch out and asset protection. These trusts help maximize family wealth accumulation and enhance protection for the client’s beneficiaries against divorce, lawsuits, creditors, loss of government benefits, and additional estate taxes when the remaining IRA is passed down to the next generation.
We have just received notice of the amount of the 2012 increase to the Aid & Attendance benefit. Starting in January, married Veterans can receive up to $2,019/mo. in reimbursement for unreimbursed medical expenses. Single Veterans can receive up to $1,703/mo. And Surviving Spouses may be eligible for up to $1,094/mo. This is the first [...]
So what can I share with the adult children of my clients who are looking for a bit of financial relief?
Most Americans have never discussed what should happen when they die. There are many decisions to make, yet they have very little help in making those decisions. Studies show that more than 90% of Americans believe that pre-funding their funeral is a good idea, yet only 12% have done it. Studies also show that elder [...]
There are unique planning requirements for families with children, grandchildren or other family members (such as parents) with special needs. However, a lot of misconceptions exist in this area that result in costly mistakes in planning for special needs beneficiaries. In this post we will cover the three most common mistakes related to special needs [...]
Medi-cal (called Medicaid in states other than California) planning can be divided into two types based on urgency: pre-planning and crisis planning. Pre-planning is for those individuals who have not yet begun to spend their assets on private care, but may need to in the coming years. Crisis planning is for those individuals using their [...]
While disability and retirement planning, and special needs planning can be ‘top of mind’ issues for boomers or older seniors, there are two additional essential estate planning needs that are not directly tied to the economy. These two concerns, if not addressed adequately, are responsible for a lot of family discord and discontent, not to [...]
These are difficult times. Consumer confidence is low, and its a long way before the economy is expected to fully recover. Many of us are concerned, wondering what planning we should do now, if any. For the vast majority of Americans, planning is not discretionary. These individuals continue to have personal concerns that they need [...]
In previous posts I discussed how long term care needs of seniors can be met through self (or third-party) insurance. But what if these are not possible options? A senior can use a planning technique called a “Medicaid” trust. (Here in California, it’s called “Medi-Cal” trust). This is part of a comprehensive wealth planning process [...]
In the previous post, we discussed Medicare’s limitations in covering long term care needs. There are several options available, each differing in terms of coverage and complexity. These alternatives are all part of a comprehensive life care planning and wealth management strategy. Here are two basic options available: Self-insurance for possible long term care expenses. [...]