Wednesday, July 2, 2014

IRA Folly

 Many of us spend our lives scrimping and saving so we have something to leave to our families.  

Leonard Smith, during his years of labor, accumulated $400,000 in his IRA which he planned to leave to his children.  He, in his last will and testament, specifically stated that the funds in the IRA should go to his children.  

In the beneficiary form which accompanies the IRA, Leonard stated that the funds in the retirement fund were to be distributed pursuant to his last will and testament.  Smith then got remarried and, a few years later, died. 
  • The money, of course, went to his children or did it? 
  • The money ultimately went to the wife in spite of the beneficiary form instruction and the will. Why?

In most cases the will dictates who gets what from a decedent's estate but there are exceptions.  Insurance policies go to the named beneficiaries, not the heirs.  The same result with joint and survivor property which passes by operation of law to the joint tenant. 

What about the IRA?  Here the beneficiary form overrode the will.  The form did not specifically name the Smith children so it was ruled invalid and the proceeds, after a costly court battle, went to Smith's spouse. Don't repeat Leonard's error.

Caveat- it took most of your life to earn this money so spend a few extra minutes when planning and completing documents so that you can achieve the results you desire. Read the paperwork! Once you are deceased, there are no second chances.

Contributed by Robert S. Blumenfeld, Esq. of Marini & Associates, P.A.

Have An Estate Problem?

Contact the Tax Lawyers at
Marini & Associates, P.A.

for a FREE Tax Consultation Contact US at 
or Toll Free at 888-8TaxAid ((888) 882-9243)

No comments:

Post a Comment