is my ira included in my estate
Is My IRA Included in My Estate? Some Tips and Common Mistakes

By now, you’ve probably been contributing to your IRA for many years. It’s the nest egg that is going to get you through the best years of your life. But there’s one question you need to ask yourself: is my IRA included in my estate? We don’t want to think about it, but what if something happens to you before you can use the money you’ve been squirreling away? Will it go to the right people if something happens?

Do you know what will happen to your IRA after you’re gone? If not, here are some tips and common mistakes that you can learn from to make sure your retirement account benefits the people closest to you.

IRAs and Taxes

Whether and how your IRA is taxed depends on the type of individual retirement account you choose. You should sit down with an estate planning attorney to determine what taxes your estate will have to pay for your IRA. Unlike traditional IRAs, Roth IRAs are not subject to income tax when they are distributed to your beneficiaries. But Roth IRAs do not make sense for everyone.

Retirement accounts are not one-size-fits-all. Depending on the size of your estate, you might also consider giving your IRA to a charitable organization. Doing so will bypass the income tax, plus you’ll have a sizeable charitable contribution deduction. To determine what type of IRA makes the most sense for your situation and how you will distribute your IRA, talk to your estate planning attorney and financial advisor.

Giving Your Family an Advantage

Once you’ve answered the question is my IRA included in my estate plan? you can start to strategize how your IRA will be paid out to your loved ones. One way to make an inherited IRA, even a modest one, last longer and pay out more is to take the stretch-out approach.

In the stretch-out approach, your beneficiaries will be able to collect from your IRA over a long period of time, allowing it to accrue growth while minimizing how much is sacrificed to taxes. Talk to your estate planning attorney today to learn how to do this.

Common IRA Mistakes

One of the most common IRA mistakes that people make is allowing the beneficiary forms to become out of date after a major life event—this includes divorce, marriage, having children or grandchildren, and any other event that affects how you want to distribute your assets.

Perhaps one of the most consequential IRA mistakes that you can make is neglecting to choose a guardian for an IRA that you leave to your minor children. Appointing a guardian will protect your children’s inheritance until they come of age, at which point they can use the money to start their lives. Without a guardian, your IRA may end up going to someone you didn’t want, such as exes or family members you hadn’t considered leaving money to.

Is my IRA included in my estate?

Protect your retirement savings. If you can’t answer the question is my IRA included in my estate? definitively, talk to an estate planning attorney today. Contact us to set up a consultation.