Inherited IRA

Issues Surrounding the Inheritance of a Texas IRA

Published on: August 31, 2021 | By McCulloch & Miller, PLLC

When family members think about what assets they may receive after a loved one has passed away, they often think about physical property or sentimental objects. However, another common inheritance is an individual retirement account or an IRA. An IRA allows an individual to save money for retirement with tax advantages. There are strict rules regarding an IRA and how a beneficiary can use it. Because of this, beneficiaries may be confused about how to manage their new IRA and the specificities surrounding the account. Below are common questions and explanations about IRAs and retirement planning.

What is an IRA?

An IRA (individual retirement account) is a financial account set up for individuals to save for retirement. IRAs are either tax-free or are set up on a tax-deferred basis. There are also different types of IRAs, including a traditional and Roth IRA. The major distinction between these two IRAs is the timing of the tax advantages. Traditional IRAs allow individuals to make contributions now and the earnings are tax-deferred until the money is withdrawn. On the other hand, with Roth IRAs, individuals make contributions with money they have already paid taxes on—therefore, the money will grow tax-free.

What Are the Rules About Inheriting an IRA?

Published on: January 10, 2019 | By McCulloch & Miller, PLLC

The rules are strict, and mistakes can be costly.

Inheriting an IRA is not like inheriting any other asset. You’ll need to be very careful to follow the rules. Usually the parent is the beneficiary and the children (grandchildren) are successor beneficiaries. Here’s how it works, as described in nj.com’s recent article, “Inheriting an inherited IRA? Your payout choices will be limited.”

Per IRS rules, if you die prior to withdrawing all the funds from an inherited IRA, then the beneficiaries are bound by the same Required Minimum Distribution (RMD) schedule that they’d chosen when they inherited it.

A Love Story: George and Barbara Bush

Published on: January 2, 2019 | By McCulloch & Miller, PLLC

Their lives were devoted to family and public service, and to each other. The passing of George H.W. Bush and his wife gave many Americans pause to consider their leadership and their devotion.

Few were surprised when George H.W. Bush passed less than eight months after Barbara’s death. Their deep connection—from his service in World War II to the Presidency and their role in public service after leaving the White House—was evident to everyone around them, says Forbes in the article, “Valuable Estate Lessons From The Passing Of George And Barbara Bush.”

The death of a longtime married couple in quick succession, is often called “broken-heart syndrome” or “widowhood effect.” The thought is that the lives of two people are so entwined they can’t bear to be without each other. The time between the Bushes’ deaths also raises practical questions in estate planning. Timing is critical in an estate plan, and if the deaths of married spouses happen within a short period of time, it can make the administration of an estate more difficult.

Proper Planning for the Distribution of an IRA

Published on: April 10, 2018 | By McCulloch & Miller, PLLC

The rules for IRA distributions can be complicated. Unforeseen circumstances can make things even more complex. Understand the rules, so the money goes where you want it to.

What happens if you designate each of your two adult children as 50/50 beneficiaries of your IRA, and then one of them dies? Will the funds go to your grandchildren?

MarketWatch answered that question in its article, “Who gets your IRA when you die? It’s not so simple.” The answer to what happens to the IRA money is dependent upon what the beneficiary designations say and when one of the children passes away. The beneficiary designations state how it will be distributed. However, that may not be what is written in your will.

Guard Your Houston Heirs From IRA Snares

Published on: May 8, 2014 | By McCulloch & Miller, PLLC

Worried about your adult children blowing through their inheritance? Two strategies can help holders of individual retirement accounts curb an heir’s impulse to “cash out.”

You may have many assets to leave behind for your heirs. However, an IRA is unique enough to be easily squandered in taxes, as MarketWatch noted in a recent article appropriately titled “Protect your heirs from an IRA tax trap.”

IRAs are some of the most common high-value assets. That noted, because they are such unique accounts, there are some equally unique rules regarding inherited IRAs that are either amenable to diligent financial planning or a short-term high of a cash-out.

No Beneficiary Designation? An IRA “Uh-Oh” for Houston Families

Published on: February 6, 2014 | By McCulloch & Miller, PLLC

We say it over and over again. Check your beneficiary forms! Don't let your retirement funds go down the drain.

Anything involving the court system is rarely quick and painless (probate anyone?). Fortunately, IRAs can easily be transferred to your loved ones outside of probate simply by completing a beneficiary designation form. But what if there was no beneficiary designation form completed? Uh-oh, what now?

The slightly messy situation of an IRA left without a beneficiary was tackled recently by Ed Slott’s blog, The Slott Report. The article, titled “There is No Beneficiary on the Retirement Account: Now What?,” is the perfect encouragement to ensure that every beneficiary form is filled out and up to date.

Can Inherited IRAs Be Impacted By Bankruptcy in Houston?

Published on: December 19, 2013 | By McCulloch & Miller, PLLC

While the dispute over inherited IRAs has not arisen often, it may crop up more in the future.

Does an "inherited" retirement account remain a retirement account for the intended heir? This may sound like a rhetorical question, but it is currently one before the U.S. Supreme Court in the matter of Clark et ux. V. Rameker et al.The decision could have important consequences for those who are looking to leave an IRA to their heirs – and NOT to the heir's creditors.

This issue was explored by Reuters in a recent article titled “U.S. high court to chart fate of inherited IRAs in bankruptcy.”