CALL OUR IRVINE OFFICE TODAY - Local: 949-450-0041

If you have inherited an IRA or 401(k), there are ways you can maximize that inheritance that are far preferable to just taking the money and running. Here’s what you need to know:

Check the beneficiary form on file with the financial institution that holds the IRA. The person named as beneficiary will inherit, no matter what a will may say. If there is no one listed, then the financial institution’s default policy rules. Most default to the estate, which is not preferable. Some default to a surviving spouse.

If the account holder was over the age of 70 ½ at death, determine if they took their required minimum distribution before they died. If not, the beneficiary has to take it before transferring assets.

Roll over an inherited 401(k) into an inherited IRA so beneficiaries can stretch out the annual distributions over their life expectancies.

Re-title the account to avoid paying income taxes on all the assets. Be sure to keep the original owner’s name on the account along with the name of the beneficiary – for example, “John Doe, deceased, inherited IRA for the benefit of Jane Doe, beneficiary.”

Don’t combine an inherited IRA with your own unless you are a surviving spouse. When moving assets between institutions, request a trustee-to-trustee transfer.

If there are co-beneficiaries, ask the custodian to split the inherited retirement account so each beneficiary can take the distribution over his or her life expectancy. You must request subdivision by Dec. 31 of the year following the death of the original owner.

Name a successor beneficiary for any IRA or 401(k) you inherit; the leftover funds will then transfer to them, and they can take distributions over your remaining life expectancy, if any.

The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0042.