Saving for retirement is important and estate planning and elder law attorneys can provide the help that you need to ensure you have financial security during your golden years. One of the best ways to make sure you have saved enough for retirement is to invest regularly in IRAs, 401(k)s, 403(b)s or other work related retirement accounts. However, you need to understand rules for IRA and Retirement Account management and operation and you also need to consider what will happen to these accounts after you pass on.
Clarity Legal Group® can provide the assistance and advice that you need when you make plans for your future by investing for retirement. We can help people of all ages to growth their wealth and to ensure that their savings is protected so their nest egg can support them during their golden years. To find out more about the assistance we can offer, give us a call today.
You have not had Estate Planning if your Attorney did not address your work related and Individual Retirement Arrangements
IRAs, or Individual Retirement Arrangements, are accounts you can open yourself at any brokerage, bank, or financial institution. You can use IRAs to invest with pre-tax funds or with after-tax dollars, but there are tax benefits to all IRA investing. If you or your spouse are covered by a retirement plan at work, there are income limits on IRA investments. However, many people can invest in an IRA and if no limitations apply you should be able to save up to $5,500 per year in an IRA as well as an additional $1,000 per year in catch-up contributions if you are older.
You may have an IRA even if you have a 401(k) or other work related retirement account. Be aware that there are limitations to what you can add to an IRA on a tax deductible based upon whether you or a spouse are covered by a work related retirement account. There can also be IRA deduction limits based upon your adjustable gross income. The IRS page discussing these limitations can be found here.
There are different types of IRAs, including a traditional IRA that you invest in with pre-tax dollars and a Roth-IRA that you invest in with after tax dollars but that gives you a tax break during your retirement. With a Roth IRA, you are able to withdraw money without paying taxes on gains or on withdrawals as long as you follow specific guidelines such as keeping the account open for at least 5 years before making withdrawals.
When you invest in an IRA, you should be aware that there are penalties for early withdrawals if you begin taking money out before you are age 59 1/2, unless you fit within an exception that allows you to withdraw funds early. You should also be aware that if you’re 70 1/2 or older, you must take required minimum distributions (RMDs) in order to avoid incurring tax penalties.
Clarity Legal Group® can help you to determine if you are eligible to invest in an IRA and can assist you in determining the type of IRA that should fit in best with your retirement plans.
There are also complicated issues that arise when you inherit an IRA from a loved one or when your family members inherit IRAs. Planning for getting the best outcome for your beneficiaries — taking advantage of opportunities and avoiding pitfalls — is an important part of estate planning. You will need to understand what the options are for inherited IRAs. A spouse — but only a spouse — can roll an inherited IRA over into his or her own IRA. This is a valuable option, because the required minimum distributions applied when someone is taking distributions from his own IRA are much more favorable with respect to tax deferral than distributions from an inherited IRA. Furthermore, the next generation of beneficiary of IRAs will be able to use their life expectancies as determined at the date of the surviving spouse’s death for defining their required minimum distributions, which is not possible for a person inheriting an IRA from someone who previously inherited the IRA from someone else (and was not able to do the spousal roll over). In any event, the younger the beneficiary, the more the potential tax deferral. If a beneficiary is under the age of 18, they will likely need to inherit their IRA through a trust arrangement. Without special attention given to the language of this Trust, the beneficiary may lose the ability to defer the distributions over his or her life expectancy. Confusing? That’s one of the reasons it helps to work with an experienced estate planning attorney.
At least an IRA is protected from the creditors of the beneficiary, right? Not so fast. You own IRA is protected from creditors up to $1,000,000 under federal laws. Federal laws offer no creditor protection for inherited IRAs. In most states, an inherited IRA is not protected from creditors under state law, but North Carolina does offer some protection, but only for beneficiaries residing in North Carolina.
There are a lot of issues to consider when planning for IRAs and work related retirement accounts. Clarity Legal Group® can provide personalized advice on inherited IRAs to make sure you do not incur any tax penalties if your loved one has left you an IRA, or can help you to make an inheritance plan that includes your IRA and allows you to pass this account onto loved ones in the best and most appropriate way.
Often our clients have a significant percentage of their total estates tied up in IRAs and work related retirement accounts. Getting the tax planning and management control of these accounts in sync with the other legal documents which are part of your estate plan is critical to getting the results you intend.
Getting Help from Experience Estate Planning Attorneys
Making smart choices about investing for the future is just one of the many things that you need to do in order to be prepared for retirement. The estate planning attorneys at Clarity Legal Group® can do more than just provide you with basic advice about investing in an IRA. We can also help you to develop a comprehensive estate plan to help you control your legacy. I have not even mentioned in this blog the significant challenges associate with dealing with IRAs and retirement accounts when it comes to Medicaid qualification. If Medicaid is part of your long term health care planning considerations and you have even a modest IRA, you should see Clarity Legal Group® or some other experienced elder law firm promptly!
To find out more about the ways in which our firm can help you with retirement and financial planning issues, give us a call at 919-484-0012 or contact us online today.
- How Does the Coronavirus Impact your Need to do Estate Planning? - March 10, 2020
- What If I Don’t Want to Be the Executor? - March 5, 2020
- How Do I Know If I Need to Probate My Mother’s Estate? - March 3, 2020