Cynthia Crofoot Rignanese, Esquire
Thinking Globally, Practicing Locally in Central Florida Since 1990

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Strategies To Protect Inherited IRAs

Many Florida residents have individual retirement accounts, or IRAs, which can accumulate a lot of money before the person retires and begins to draw on the funds. One of the big appeals of these accounts is that they gather interest tax-free, so long as the account holder doesn't withdraw any money from it until after retirement or other conditions are met. IRAs can be a great supplement to other retirement accounts, and they can be part of a person's estate and assets when they pass away. However, inheriting someone else's IRA can lead to a lot of confusion.

Some of this confusion got worse recently when the U.S. Supreme Court ruled that an inherited IRA is not exempt from bankruptcy hearings. This means that those who declare bankruptcy must have an inherited IRA counted among their property for purposes of bankruptcy. Even without bankruptcy entering the picture, an inherited IRA can lead to high taxes or other problems.

The simple way around this is for the account holder to grant the IRA to a loved one not through a will or other inheritance, but through naming the loved one as the beneficiary of the account. This can pass the account directly to the beneficiary without the account being considered part of the original holder's estate. Technically speaking, the IRA would then not be inherited at all. Naming a beneficiary is generally easy to do, but it's also important to keep beneficiary information up to date. Divorces, deaths and other big changes in families over the years can render an old beneficiary designation useless.

In some cases, a good option would be to name a trust as the beneficiary of the IRA. This could help ensure that the account doesn't burden the beneficiary with tax penalties or other problems.

There are many things to consider when planning one's estate. There are many strategies that can help preserve a legacy for future generations. Florida estate planning attorneys can help people to gain peace of mind, knowing that they have set up their loved ones for a more comfortable life.

Rignanese & Associates is available to work with clients on their business strategy/real estate/estate planning needs. Please reach out to us at 863.294.1114.

Source:, "Avoid these mistakes with inherited IRAs," July 21, 2014.

Cynthia Rignanese