What does an IRA mean for your estate plan? Most associate IRAs with retirement, but what happens to your IRA after you pass away? If you’ve created an estate plan correctly and worked with an attorney, your IRA can be an asset. However, if you’ve neglected your estate, there’s a your IRA could end up going somewhere else or incurring taxes for your beneficiaries. Learn how your IRA fits into your estate plan below, and contact attorney Michael LaCava by calling (630) 444-7504 to discuss how you want your IRA handled.

What does my IRA mean for my estate?

Individual retirement accounts, or IRAs, are the largest investment most people will make in the course of their career. Whether you’re creating a trust, will, or a complete estate plan, you must account for your biggest assets. That includes property, investments, bank accounts, and your IRA. Including your IRA in your estate plan with a clearly designated beneficiary ensures your wishes are executed properly.

What happens if I don’t account for my IRA in my estate plan?

It’s not uncommon for beneficiary forms to be out of date after a major life change. If you’ve gone through a divorce, had a child or a grandchild, or any other major event that would necessitate a change to your beneficiaries, it’s important to have it done correctly and immediately.
We’ve also seen clients name their estate as the beneficiary of their IRA. This is a poor strategy because the funds in your IRA will go to your beneficiaries over a few years. This incurs largest taxes and limits the growth of your IRA. If a person is named as your beneficiary, they can continue to grow your IRA as it pays out.

How are IRAs taxed?

Other than choosing beneficiaries and the type of trust you want for them, taxes are the greatest concern when creating an estate plan. If you have a large estate, you may need to get a life insurance policy and life insurance trust to limit the costs of estate taxes for your beneficiaries. If your estate meets certain requirements, it will incur estate taxes and taxes for IRA distribution. Roth IRAs are an exception to income taxes for your beneficiaries, and may offer an answer to tax concerns. It’s best to meet with a financial planner and an attorney to choose the best solution for your estate.

Do you have questions about your IRA and your estate plan? Contact LaCava Law Firm in St. Charles, IL by calling (630) 444-7504 or through our inquiry form to schedule a consultation and get the answers you’re seeking. An estate planning solution for your IRA is closer than you think with attorney Michael LaCava.

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