In this video, I’ll talk to you about how protect family wealth, preferably before your loved ones have passed. It can be difficult to discuss sometimes, but it’s better to do it now, than when everything falls into probate court. The Secure Act of 2020 has changed the way you need to handle an inherited IRA or 401K, so don’t get caught off-guard.

NOTE: The information provided by John Ross is intended for educational use only. Please consult with a registered professional before acting on any information herein.

0:00 How to Protect My Inheritance
0:33 Inheriting a Parents IRA
2:18 When to Take Out IRA Distributions
3:42 Inheritance, Creditors, and Bankruptcies

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You might think that your parents retirement plan assets, like an IRA, Roth IRA or 401k, are automatically rolled into your own IRA, but the truth is that non-spouse beneficiaries will have to take required minimum distributions (RMDs) over the course of the next 10 years, until the account is completely empty.

While spouses can take advantage of an unlimited marital deduction, children and siblings can’t. The best thing they can do is to make sure that they are named directly as beneficiaries of the IRA, 401k or Roth IRAs.
The IRS doesn’t allow you to roll the money from an inherited IRA into one of your existing accounts. Instead, you’ll have to transfer your portion of the assets into a new IRA and formally name it as an Inherited IRA. No additional contributions are allowed in the new, inherited IRA account. Instead, you have 10 years to empty out this account, in full.
Sometimes, when the plan is a 401k, employers may even force non-spouse beneficiaries to use the “5-year rule”, which is where the entire account has to be liquidated by the end of the 5th year after death.This supersedes the previously mentioned 10-year rule.

Lastly, Roth IRA beneficiaries can withdraw contributions tax-free at any time. Note here that we’re talking about Roth IRA contributions. Earnings from an inherited Roth can also be withdrawn tax-free, as long as the account had been open for at least five years at the time the account holder died. If the Roth IRA was less than 5 years old at the original owner’s death, you’ll owe taxes on the earnings you withdraw as well.

The SECURE Act started on January 1st, 2020, and brought several changes to the rules about retirement accounts. In general, it requires you to withdraw all of the money over 10 years. However, there are a few exceptions:
– If you inherited the IRA from your spouse, you can transfer the full amount to your personal IRA like it’s your own. If it’s a traditional IRA, required distributions start when you reach 72.
– If you’re a minor child, you must start distributions at age 18. You will then have 10 years to withdraw the entire amount.
– If you’re chronically ill or disabled, and you meet a strict IRS definition, you can stretch the IRA distributions throughout your lifetime.
– If you’re less than 10 years younger than the account owner, then withdrawals can be stretched out over your lifetime. This often applies to siblings, but unmarried couples also may meet this exception.
– If you have a workplace retirement plan or your own IRA, consider using your inherited IRA withdrawals to cover living expenses. That could free you up to contribute more of your earned income into your own retirement plan. If you qualify, you can put as much as $6,000 per year ($7,000 if 50 or older) into an IRA every year, and up to $19,500 ($26,000 if 50 or older) into a 401(k)….(read more)

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How to Protect Family Wealth: Safeguarding Your Inheritance

In today’s uncertain economy, it has become increasingly important to protect your family’s wealth. Whether you’re concerned about preserving your own assets or safeguarding an inheritance for future generations, the following strategies can help ensure that your hard-earned wealth is secure.

1. Establish a Comprehensive Estate Plan:
Creating a well-defined estate plan is crucial for protecting family wealth. This plan should include a will, trust, and power of attorney. A will allows you to dictate how your assets will be distributed, while a trust helps protect your assets from taxes, creditors, and potential disputes among heirs. Additionally, designating a power of attorney enables a trusted individual to manage your affairs if you become incapacitated.

2. Diversify Your Investments:
To safeguard your wealth, it’s important to diversify your investment portfolio. By spreading your investments across different assets such as stocks, bonds, real estate, and commodities, you reduce the risk of losing everything in a single market downturn. Diversification helps protect against market volatility and ensures your investments are not overly reliant on a single sector.

3. Optimize Tax Planning:
Mitigating tax liabilities is an essential aspect of protecting family wealth. Consult with a qualified tax advisor to identify legal strategies to minimize your tax burden. Utilizing tax-efficient accounts such as Individual Retirement Accounts (IRAs) or 401(k)s can help defer taxes and optimize long-term savings. Additionally, taking advantage of tax deductions, credits, and exemptions can further reduce your overall tax liability.

4. Consider Asset Protection Trusts:
Asset protection trusts are a valuable tool for safeguarding family wealth against potential creditors or lawsuits. By transferring assets into an irrevocable trust, you can protect them from claims resulting from unforeseen circumstances such as business failures, bankruptcy, or personal lawsuits. These trusts ensure that the assets remain in the family and shielded from any potential threats.

5. Regularly Review and Update Legal Documents:
Laws and personal circumstances change over time, so it is imperative to review and update your legal documents regularly. Life events such as marriage, divorce, the birth of children, and the death of loved ones can necessitate revisions to your estate plan. Set a reminder to conduct periodic reviews with your attorney to ensure your family’s wealth stays protected in line with your evolving needs and goals.

6. Communicate with the Next Generation:
Openly discussing your family’s wealth and intentions with your loved ones can help prevent future disputes and maintain family harmony. Transparent communication allows the next generation to understand the value of the inheritance and the responsibility that comes with it. By educating them about proper financial management and the family’s legacy, you equip them with the tools needed to sustain and grow the wealth for generations to come.

In conclusion, protecting family wealth requires careful planning and proactive measures. Establishing a comprehensive estate plan, diversifying investments, optimizing tax planning, leveraging asset protection trusts, regularly reviewing legal documents, and fostering open communication are key steps to safeguard your family’s wealth and secure a cherished inheritance. By implementing these strategies, you can ensure that your hard-earned assets withstand the test of time and leave a lasting legacy for your loved ones.