Forbes Best-In-State Wealth Advisor, Cary Stamp, CFP®, discusses the best way to tax-efficiently use the assets in an IRA that you have inherited.

TRANSCRIPT:
Hi, I’m Certified Financial Planner Cary Stamp, and today I’d like to talk about the topic of IRAs, specifically what happens when somebody has an IRA, they pass away, and they name YOU as the beneficiary of the IRA.

You have several choices. Number one, you can take the cash. If it’s a bank or a financial institution or a brokerage firm, you can call them up and say, hey, cut me a check, send me the person’s IRA money. If it’s in a traditional IRA, you will pay a bucket load of taxes on that distribution because every dollar that you’re going to take out of that account is going to be taxable in the year in which you withdraw it. There’s another way to do this and most custodians of IRAs don’t even know how to explain this to most beneficiaries. And that’s to use what we call an inherited, or some people call it a beneficiary, IRA.

This inherited or beneficiary IRA is an account that you set up with your name on it that allows you to pull the funds out of the account over a period of as long as 10 years. That means that you can spread the taxes out. So if you inherit a substantial IRA and you have a pretty good job, you may not want to bump your income tax rate in one single year. So you’ve got 10 years to do some planning and spread this out.

Now, why is this important? It’s important because most people don’t know about it, they don’t understand the rules and quite frankly, if you get the custodian of an IRA on the phone, they probably won’t even tell you about this type of a strategy. Why? Because many custodians view it as a liability that they would be giving you tax advice on how to take money out of your IRA. If you are the beneficiary of a large IRA, you owe it to yourself to get some good competent financial and tax advice.

If you have questions, call us. We’re Cary Stamp and Company and we’re here to help….(read more)

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