GetMoore Media
DON'T RELAX YET: YOUR BENEFICIARIES NEED YOUR HELP!
DON'T RELAX YET: YOUR BENEFICIARIES NEED YOUR HELP!
Contrary to popular belief, the simplification of the IRS's minimum distribution rules in 2002 does not automatically mean favorable tax treatment for everyone. In fact, even though we can agree that the planning process has become easier, the naming of the right beneficiaries is a very important step and is still being done with less that ideal effectiveness.
According to Marty Higgins, retirement distribution specialist, "It is imperative that the naming occurs prior to death." Think of this in relationship to the Major League Baseball Play-Offs; all rosters are frozen as of the end of the season. Post-season play then begins with that frozen roster. Similarly, the date of death begins post-season planning and not other beneficiaries may then be added to the roster.
Consequently, additional problems can and do occur when minors are named as beneficiaries in the many states have mandated precautionary statutes to protect the child's interests. Having an individual (mom or dad) appointed as a guardian for the assets is not only bad planning, but expensive, since it could cost several thousand dollars to do so. Spousal rollovers are another avenue where proper planning can prevent automatic beneficiary designations to occur. Reason being, the IRA must pass to the surviving partner's beneficiaries (maybe their children) will be able to compute minimum required distributions using their own life expectancy.
All in all, the message becomes clear to take care in obtaining assistance with the beneficiary details that can dramatically affect your greater plan. Providing the funding of estate and income taxes at the owner is essential. People fail to realize "It's not about what you make. It's about what you keep."
