If you have recently inherited an IRA from a loved one, you may not be aware that you could be paying more tax than is necessary. Because IRA beneficiaries may qualify for special tax breaks, they are often missed and because IRAs are distributed differently than other assets both during life and after death, it’s important to schedule a consultation with an experienced professional if you have questions about an inherited IRA.
If you intend to pass on your IRA to a loved one, advanced planning with an estate planning lawyer may also be beneficial. IRAs may require their own unique estate plans that need to be incorporated within the overall estate plan. This is especially true since a recent US Supreme Court ruling changed the liability protection that was previously enjoyed with an inherited IRA.
Over the course of life, IRAs cannot change ownership or be jointly owned, and investment gains within an IRA may not be subjected to the 3.8% investment income surtax. Since IRAs pass by contract and not by will, you will need to have separate estate planning measures in place. If you are to inherit an IRA from a taxable estate, did you know that you or a beneficiary could be entitled to a specific deduction that could help to offset some of the distributions that would otherwise be taxable from that IRA? Two distinct entities; the settling estate and the IRA beneficiary would have to work together to coordinate their tax planning. But this can be achieved after consulting with an experienced professional.
