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Caring For Generations

Possibly Beneficial Beneficiary Ploy

by | Mar 6, 2024 | IRA beneficiaries, Tax Planning

“When you name a charity as a beneficiary to receive your IRA or other retirement assets upon your death, rather than donating retirement assets during your lifetime, the benefits multiply: Neither you,your heirs or your estate will pay income taxes on the distribution of the assets,” Fidelity explains..

In a recent article in Forbes, “Old Roth, New Tricks”, William Baldwin carries that thought one step further. In discussing Roth conversions, the author suggests: “Leave some money in your IRA without converting it to a Roth.  That will be devoted to covering nursing care or other medical care.  The ultimate beneficiary can be a charity, so it doesn’t generate taxes after death. But, if you need it for medical expenses, medical deductions will offset at least some of the tax.”

As estate planning attorneys, here at Geyer Law, we’ve always stressed the importance of carefully naming beneficiaries on IRA accounts.  Not only does an IRA beneficiary designation form actually override the directives in a will, the tax laws surrounding inherited IRAs are complex, not to mention subject to periodic changes.

“For seniors with significant healthcare expenses, this can offer tax savings. You are allowed to deduct any medical expenses that exceed 7.5% of your adjusted gross income,”  Paying for Senior Care explains.

Do you have a big wad in a pretax IRA? Baldwin asks. “Sit down with your accountant,”‘ he advises. Although our estate planning attorneys at Geyer Law do not offer tax advice, instead working in concert with our clients’ tax professionals, reviewing your IRA beneficiary designations and charitable planning are essential parts of every estate planning discussion.

  – by Cara Chittenden of Rebecca W. Geyer & Associates