IRA Category Archives — Page 4 of 4 — Houston Estate Planning and Elder Law Attorney Blog Published by Houston, Texas Estate Planning and Elder Lawyers

Ruling by Supreme Court Changes IRA Safety

Published on: August 12, 2014 | By McCulloch & Miller, PLLC

A ruling by the U.S. Supreme Court holding that assets contained in an inherited individual retirement account (IRA) don’t qualify as retirement funds for the purposes of bankruptcy exemption, has turned the estate planning community on its head.

Prior to a recent US Supreme Court ruling, inherited IRAs were treated as retirement savings and not as current income. It was thought that if you made an heir a beneficiary of your IRA, the money in the IRA would be safe from your heir's creditors after you passed away. Well, those inherited IRAs may now be fair game to creditors.

As Insurance News Net points out, in an article titled “Court Decision Has Implications for Estate Planning,” the full implications of this court ruling are not yet clear. The court's decision leaves open the possibility that a surviving spouse named as the beneficiary of an IRA might still be able to treat it as retirement savings, but the court did not address that issue. For other beneficiaries, however, it is clear that in most states, inherited IRAs will be much easier for creditors to claim in bankruptcy proceedings or otherwise. Such an inheritance will be treated as income, not retirement savings.

Balancing Retirement and Estate Planning in Houston: Can a Roth IRA Help?

Published on: June 18, 2014 | By McCulloch & Miller, PLLC

The question of which investment accounts you should tap first in retirement can often be a tricky one. But it gets even trickier if your goal is to leave money to heirs.

How do you balance retirement with your estate planning goals? After all, even if you plan to leave it all to your heirs, you still need to be sure you can take care of yourself to the end. What assets should you spend down first and how should you do so to maximize both end-of-life comfort and the inheritance to leave behind?

The Wall Street Journal pegs the solution in an article titled “The Most Valuable Assets to Leave for Your Heirs.” In the article there’s a strong case for the Roth IRA, and you may have heard the fanfare already. These accounts have been around for a while, but it has only been in the past few years, with the modification of a few laws, that they have become available to just about everyone. In fact, even traditional IRAs can be converted to one.

Houston Families and Spousal IRA Heirships

Published on: May 2, 2014 | By McCulloch & Miller, PLLC

A spouse who inherits an IRA has a choice. The surviving spouse can move the account into an inherited IRA to keep the tax shelter. Or she can choose to roll the account into her own IRA.

There are some unique rules that go into effect when an IRA is bequeathed and inherited. If a spouse is inheriting the IRA, they have extra leeway that’s worth putting to good use.

The sorts of things an IRA inheriting spouse ought to think about don’t make the headlines quite as often. However, DailyFinance offered a helpful guide a short time ago in an article titled “When A Spouse Inherits An IRA.”

Missed IRA Rollover Deadline? How to Get Relief From Being Taxed on “Distribution”

Published on: March 13, 2014 | By McCulloch & Miller, PLLC

Dad missed the 60-day IRA rollover period and is now being taxed on 100 percent of his life’s savings. Can anything be done?

Applicable IRS rules and regulations provide that if someone receives a distribution from an IRA, the distribution is then taxed at an individual’s ordinary income rate. A distribution can occur inadvertently in cases where a person wishes to rollover the IRA funds from one investment account into another and the rollover is done incorrectly. This can have disastrous tax results. Again IRS rules and regulations do provide that if there is “reasonable cause,” e.g. mistakes or incorrect actions, missed deadlines can be undone. There are strict timelines again for these procedures, and if all other timelines have passed, the taxpayer can seek relief by means of an IRS Private Letter Ruling (“PLR”). These PLRs are technical and complex to obtain and have significant filing fees and transaction costs but, if someone’s life savings are at issue, it can be worthwhile.

In a recent IRS Private Letter Ruling (PLR)⁽¹⁾, attorney-CPA Tom McCulloch and attorney-CPA Chris Kolenda successfully assisted a taxpayer who had missed a rollover deadline because the institution receiving the funds from the old IRA completed the paperwork incorrectly. Also, that the taxpayer suffered dementia from Alzheimer’s Disease. The process included obtaining sufficient medical evidence about the taxpayers’ medical/cognitive condition from several years past and presenting it cogently to the IRS along with substantiation of the institution’s mistakes. The IRS Private Letter Ruling allowed the taxpayer to successfully roll over the IRA funds from the old account into a new IRA account and avoid being taxed on a significant part of his/her life’s savings.

Houston Families: Consider Gifting Your IRA To Your Grandchildren

Published on: February 25, 2014 | By McCulloch & Miller, PLLC

Whichever way you pass on your retirement account assets, leaving an IRA can provide a grandchild with a significant financial foundation.

Think of an IRA as a potentially powerful estate planning tool. Properly structured, an IRA may transfer wealth to younger generations. In fact, the younger, the better.

Kiplinger raised this point in its January edition with an article titled “Pass an IRA to Young Grandkids With Care.”