Estate planning with IRAs can create a reliable form of protection and security, but you have to make sure it is set up correctly. When it comes to estate planning, the number one goal is to make sure your loved ones are protected if anything happens to you.
Trust me, if anything happens to you, they will have enough problems to deal with. Don’t let them have to worry about what happens to the hard earned IRA funds you have accumulated over the years. If you make sure to set up your IRA
properly now, you will save them from much of the hassles that could possible come up if done incorrectly.
When conducting estate planning with IRAs, there are two taxes you need to worry about. The first is income tax, which we all know about. The second is inheritance tax, sometimes known as estate tax. This amount varies state by state.
Be aware that saving up too much money in your IRA may prove to be a disadvantage. Including your home’s value and the value of other real estate, your estate value must be under the Applicable Exclusion Amount, which is currently 2 million dollars. If it’s not, then your beneficiary may have to pay up to 50% of the amount in taxes. Unbelievable, right? But it’s true…
This is why it’s so important to make sure your estate planning with IRAs correctly follow the proper rules that surround your overall plan. Also make sure a beneficiary is stated when you first open the account and that they are
continually updated as it is passed on from heir to heir. Also be sure to consult with an attorney or estate planner to learn more about what rules and regulations apply with your unique situation.
Another great way to conduct estate planning with IRAs is with a Roth IRA. A Roth IRA is one where contributions are made with after-tax dollars. This differs from a traditional IRA, which uses pre-tax dollars as contributions (which are also tax deductible). Also with a Roth IRA, the funds you put into the account, as well as any profits or gains, are never federally taxed again.