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Trying to make your legacy more meaningful? If leaving a financial legacy is one of your goals, you’ve probably come across a major planning dilemma. How do you maximize the impact of what you leave behind while minimizing taxes? Today, I’ll help you make the right decision for you. Hi, I’m Hunter Brockway, founder of Boca Retirement Strategies. I help people retire stress-free, spending more, saving on taxes, and leaving meaningful legacies behind for loved ones. If you’re planning to leave a legacy, you probably want it to make the biggest impact possible. And if that legacy includes financial assets like an IRA, it’s critical to understand how your planning decisions can dramatically affect what your heirs actually receive. Many people choose to establish a trust to maintain control over their legacy beyond their lifetime. A trust is a fantastic planning tool, but if it’s not set up correctly, it could take a much bigger tax hit than you realize. Here’s the situation. If you have an IRA that will be inherited by a trust and the trust isn’t structured properly, your heirs could face significant loss. If you’re planning to leave a legacy, you probably want it to make the biggest impact possible.
And if that legacy includes financial assets, it’s critical to understand how your planning decisions can dramatically affect what your heirs actually receive higher taxes. Here’s how it works. Stretch versus compressed tax rules. If your trust isn’t established as a valid, legal, irrevocable trust, at least upon your death, and doesn’t meet certain criteria such as all beneficiaries being individuals and the custodian receiving a copy of the trust by October 31st of the year following your death, your heirs will lose the ability to stretch their required minimum distributions over 10 years. Instead, the tax hit will be compressed into just five years, increasing the overall tax burden. Number two, trust RMD rates. Even if your trust is properly structured, here’s another problem. If the trust is written so that it retains RMDs instead of passing them directly to the beneficiaries, those RMDs will be taxed at trust tax rates, which can reach as high as 37%. I know this can sound complicated, so here’s the bottom line. If your IRA lists a trust as the beneficiary, make sure the trust is properly structured to meet the IRS requirements.
If the trust retains RMDs, be aware that the taxes could be significantly higher than in your individual heirs were named directly as beneficiaries. Ultimately, you need to decide what’s more important to you, maintaining control over your legacy through the trust or ensuring your heirs receive a larger financial benefit. Here’s what to do next. Review your trust documents with an experienced financial professional or a state attorney to confirm it’s structured properly for inherited IRAs. Number two, decide on your priorities, whether it’s minimizing taxes for your heirs or maintaining control through your trust. Number three, schedule a consultation with us at BocaRetirement.com to discuss how your legacy plan aligns with your goals.
Head to the free assessment tab on our page, check out the calendar, select a date and time that works for you, and we’ll call you back. Bye. Before you go, if you’re looking for a free tax smart retirement plan tailored to your unique specific situation, you can head over to our website at BocaRetirement.com, enter your information in the pop-up, and we’ll build you a plan tailored to your unique specific situation at no cost or obligation up doesn’t show for you, if you click out of it, no worries, just send us an e-mail at contact at bocaretirement.com. Again, that’s no cost, no obligation. We’ll put together a simplified plan for you to help you take the next steps for the successful stress-free retirement with more money and fewer taxes. See you over there. Bye.