An ideal retirement plan will outlast the retiree – so what happens to your IRA when you pass? Your designated beneficiary will inherit it, along with some potential issues.
When a beneficiary inherits your IRA, unless it’s a Roth, they will be subject to the Required Minimum Distribution rules under the Tax Code. Required Minimum Distributions (or RMDs) are calculated amounts of distributions that a beneficiary must take from an inherited IRA (or other retirement account subject to RMD rules) to avoid a 50% tax penalty. Better to pay payroll tax than an RMD penalty, right?
A common mistake made with inherited IRA’s is failing to split the IRA by the end of first RMD year in cases where the IRA is given to more than one beneficiary (i.e., several children). The purpose of the split is to take advantage of the stretch IRA based on each beneficiary’s own life expectancy. If the split is not done by year-end, then the RMD will be based on the age of the oldest beneficiary (making it larger than it should be for the younger beneficiary(ies)).
Proper Estate Planning requires attention to retirement accounts and beneficiary designations.
Author Bio
Paul Yokabitus
Founder & Estate Planning Lawyer
Paul Yokabitus is the founder of Cary Estate Planning, where he helps North Carolina families protect what matters most through wills, trusts, probate, and special needs planning. Known for his “planning, not paperwork” approach, Paul turns complex legal concepts into clear, practical strategies so clients feel informed and confident at every step. He has been recognized as a Business North Carolina Legal Elite attorney and a Super Lawyers Rising Star, and was named to the Triangle Business Journal’s 40 Under 40. A graduate of Campbell University School of Law, Paul lives in the Triangle with his wife, Alix, and their two sons.
Linkedin | Avvo | SuperLawyers
How We Help North Carolina Families
Paul and his team at Cary Estate Planning are fully committed to creating a personalized experience to develop thorough and comprehensive estate plans. They value their clients and go above and beyond to make sure that no details are missed. I would highly recommend Paul to anyone looking to create an estate plan.
I was referred to Paul by my Real Estate Attorney and I could not say enough about how exceptional the client service has been from everyone I spoke to. The communication is prompt and I feel like they really took the time to answer all my questions and set things up exactly as I wanted, but also recommended things to make it easier on my family down the line.
After attending one of Paul’s estate planning seminars, my husband and I knew we wanted Paul to assist us with our estate planning. His honest, professional approach to this necessary part of life put us at ease with the process. We will continue to recommend Paul and Cary Estate Planning.
We had a great experience working with Paul Yokabitus and the team at Cary Estate Planning to set up our Will and Estate Plan. The process was clear and easy, and in the age of COVID, our signing session was very well done, easy, and safe.
The Cary Estate Planning team will make sure that you have the information you need to be confident in your estate planning decisions. I learned so much from videos, a one-on-one in-person consultation, the website, emails, and a newsletter mailed the old fashioned way. The fee is very reasonable given the importance of estate planning. No matter the size or number of your assets, don’t procrastinate like I did!
Paul is a masterful attorney. He’s very good at taking your intentions and defining that into a durable Trust and Will. Best of all he is as simple and plain-spoken as you like. Or as fast as intellectual as you may be. It’s all about your your speed and your desired outcomes. Would strongly recommend this firm.
Trusted Estate Planning
Attorney Offices in Cary and Raleigh
Capability to meet virtually to help all NC residents
