Owning assets jointly with one or more of your children or other heirs is a common estate planning “shortcut.” But like many shortcuts, it may produce unintended — and costly — consequences.
Topics: Estate Planning
You’ve likely spent a lot of time working with your advisor to plan your estate. While documents such as your will, various trusts and a power of attorney are essential, consider adding a “road map” to your plan.
The “sandwich generation” is a large segment of the population. These are people who find themselves caring for both their children and their parents at the same time. As a result, estate planning — which traditionally focuses on providing for one’s children — has expanded in many cases to include one’s aging parents as well.
Although much of estate planning deals with what happens after you die, it’s equally important to have a plan for making critical financial or medical decisions if you’re unable to make them for yourself.
One advantage of inheriting an IRA from your spouse is that you’re entitled to transfer the funds to a spousal rollover IRA. The rollover IRA is treated as your own IRA for tax purposes, which means you need not begin taking required minimum distributions (RMDs) until you reach age 72. This differs from an IRA inherited from someone other than a spouse, when the entire IRA balance must be withdrawn within 10 years of the original owner’s death. (Note that different rules apply to IRAs inherited before January 1, 2020.)
As President Biden settles into his new role as President of the United States, you may be wondering how the federal estate tax may be affected.