Inheriting an IRA: Planning Techniques for Successor Beneficiaries MontGuide 200309 Marsha A. Goetting, MSU Kristen

1. Inheriting an IRA: Planning Techniques for Successor Beneficiaries MontGuide 200309 Marsha A. Goetting, MSUKristen G. Juras, School of Law, University of Montana

2. Marsha A. Goetting MSU Extension Family Economics Specialist P. O. Box 172800 Montana State University Bozeman, MT 59717 406-994-5695

3. 6 MontGuides Individual Retirement Accounts Shopping for an IRA Withdrawals from IRAs When owner is under 59 ½ When owner is between 59 ½ & 70 ½; turns 70 ½ Inheriting an IRA: Planning techniques Primary beneficiaries Successor beneficiaries

4. Individual Retirement Accounts www.montana.edu Search: Individual Retirement Accounts

5. IRA Tax Law Changes Economic Growth & Tax Relief Reconciliation Act of 2001

6. If primary beneficiary dies before withdrawing entire IRA balance…... RMD must continue to be paid to successor beneficiaries

7. Planning Technique: Designate successor beneficiaries on IRA contract rather than naming them in will

8. Why??? IRS does not consider devisees (by will) or heirs (no will) as “qualified designated successor beneficiaries”!!!!!!!

9. What if IRA owner dies without designating a successor beneficiary? Terms of IRA Contract determines

10. Contract Terminology Heirs at law Payable to primary beneficiary’s estate May grant primary beneficiary right to determine successor beneficiary

11. “Designated Beneficiary” Successor beneficiary: If any of my three children should predecease me, or if any of my three children should die before receiving his/her share of this IRA in full, the deceased children’s share shall be distributed to the deceased child’s descendants by right of representation.

12. Question #10 What will this grandchild inherit by right of representation from Grandma & Grandpa’s IRA?

13. $180,000 IRA

14. Parents have 3 children

15. Survivors : 3 children

16. Survivors : Two children & grandchild of deceased son

17. Survivors : One child & grandchildren

18. Survivors : One child & grandchildren--$20,000

19. Survivors : Grandchildren

20. Single person

21. Single person

22. More than one successor beneficiary Divide IRA in separate accounts By September 30 of year following death

23. Why??? Each beneficiary can use own life expectancy in determining RMD payable

24. “Designated Beneficiary” Joan Young has IRA Primary beneficiary: My husband, Steve Young

25. Successor beneficiary: In equal shares to our two children, Jennifer Anderson & Richard Young. If either of them should die before receiving his/her share of this IRA in full, the deceased child’s share shall be distributed to the deceased child’s descendants, by right of representation.

26. What if? Steve rolls over wife’s IRA into his own He determines beneficiaries, not Joan

27. Death of Primary Beneficiary In situations not governed by spousal roll over rules

28. Calculating RMD for Successor Primary beneficiary’s remaining life expectancy continues to be used to determine RMD payable to successor.

29. Beneficiaries

30. Nancy dies IRA balance when Nancy died, age 76, in 2018 $100,000 RMD Year 1 for Kyle (2018) $100,000 ? 12.7 = $7,874

31. 12.7 reduced by 1.0 each year for RMD Age Balance Factor 2019 IRA $$$ 11.7 2020 IRA $$$ 10.7 2021 IRA $$$ 9.7 2022 IRA $$$ 8.7 2023 IRA $$$ 7.7

32. Planning Technique!!! Multiple  Beneficiaries Separate accounts by September 30 of year following death of IRA owner

33. Planning technique for non-individual beneficiaries Family Charity 4-H Foundation Community Foundation MSU Extension

34. Planning Technique Distribute account to charity before September 30 Then, family beneficiary can use life expectancy for withdrawals

35. Disclaimers Beneficiary can  disclaim IRA interest

36. Disclaimers In writing Earlier of 9 months after date of death or, September 30

37. Inheriting an IRA: Planning Techniques for Successor Beneficiaries MontGuide 200309 Marsha A. Goetting, MSUKristen G. Juras, School of Law, University of Montana