ISSUE #35

One of the most difficult items to deal with in estate planning is being sure that your ideas, thoughts and wishes are carried out. To that end, it is becoming increasingly popular with the planning community to have each person leave instructions, either within the will or trust document itself or as an addendum. Below is what we believe and an excellent example of what one might consider when dealing with one of his or her retirement assets. Because of its length, we are presenting the letter in two parts.

 Part II

You Have Inherited My Traditional IRA

Now that you know what you are required to do, now what?

  What You Must Do Now

First, don't do ANYTHING or TAKE ANY MONEY until you've discussed your proposed actions with Mike Jones, my CPA.  He understands these rules – and a mistake can be VERY costly!

 For a copy of my beneficiary designation, contact ________________.

For instructions on how to claim your share of my IRA, contact ____________.

Right now, the IRA is held in my name.  You each must set up an inherited IRA for your share of my IRA.  Your inherited IRA account must be titled in my name as the deceased IRA owner and held for your benefit as beneficiary.

You may each set up your inherited IRA with the IRA custodian that I used, or you may use any other qualified IRA custodian. 

However, if you decide to use a different custodian, make sure the account is moved in a DIRECT TRANSFER, trustee-to-trustee, since you are NOT permitted to make a rollover.

Here's how to divide up the account.  It would be preferable to divide up the account by December 31 of the year of my death. 

But, as I stated earlier, it can be done by December 31 of the year after my death.  If you wait beyond December 31 of the year after my death, you will have to use a life expectancy based on the age I myself would have attained in the year after my death. That means larger required minimum distributions ending the IRA sooner (bad). 

But if you act in time, you can use your own life expectancies based on your age attained in the year after my death (better).

After establishing the inherited account for each of you, my IRA can be divided and transferred to each of those accounts.

ASK – IN WRITING - FOR A DIRECT TRANSFER.  

DO NOT ASK FOR A ROLLOVER BECAUSE A PERSON WHO INHERITS AN IRA MAY NEVER MAKE A ROLLOVER (except for a surviving spouse).

These rules are hair-pullingly complex – so again – please check with Mike before you take any money or make any decisions.

Your Loving Father

Used with permission.

Michael J. Jones of the CPA firm of Thompson Jones LLP in Monterey, California, is a consultant in the areas of wealth transfer strategy, trust and probate matters, and family business transitions. He is the author of The Pension Answer Book: Special Supplement on the Final Regulations Governing Minimum Required Distributions (Panel Publishers).  Mike serves on the Editorial Advisory Board of Trusts and Estates as Chair, Retirement Benefits Committee.

You may wish to access NEW information this month at: www.ashland.edu/estate and “click” on “Planned Giving” in the left hand column.

Our planned giving director, Paul Ditlevson, can be of tremendous service in helping you integrate your giving goals with your overall estate plan. He can also help you prepare to visit your attorney. You can reach Mr. Ditlevson by calling 419-289-5090 or by email to pditlevs@ashland.edu or regular mail at 401 College Avenue, Ashland, OH 44805.