Beneficiary IRAs: What are they and how to maximize your inheritance

When you inherit an IRA or make plans to pass along yours to your heirs—also known as a beneficiary IRA—you’ll likely have several decisions to make. You’ll want to limit the tax consequence while also putting in place a plan to manage the newly transferred money properly.

Here are some things to keep in mind regarding beneficiary or inherited IRAs.

First, you are able to withdraw money from your IRA without penalty as long as you return it the account in full within 60 days. When that IRA is inherited, though, that luxury does not apply.  The funds you inherit must be moved from one IRA custodian to another, or a trustee-to-trustee transfer. You must also retitle the name of the IRA.

IRAs can also be split between multiple beneficiaries. Spouses have the option to roll the assets into their own IRA and wait to distribute the money from a traditional IRA until he or she reaches the age of 70 ½. Heirs who are not spouses must begin taking minimum distributions the year the account holder died—regardless of whether the account is a Roth or Traditional; that is post- or pre-tax.

You can lower your distribution requirements by dividing the total amount in the IRA passed down by your life-expectancy, instead of using the typical IRA distribution guidelines. This will elongate the tax benefits of the account. Some 401(k) accounts are different, particularly if they are employer plans. Employers may not let beneficiaries stretch out the benefits of a plan.

At the end of your life you can plan to stretch out the benefits of your holdings by naming younger beneficiaries, like your kids, as primary beneficiaries and your grandkids as alternates. Lastly, by leaving the money to an estate, you force the heirs of the estate to distribute that money within 5 years.

If you have any questions, feel free to contact us at New Direction IRA or visit www.ndira.com.

Self-Directed IRA Fees

According to a recent Lipper analysis, a typical American household with $120,000 in mutual fund assets pays nearly $1,000 in ongoing fees every year—regardless of whether or not they actively trade with the accounts.

What’s more troubling is that another investigation, this time by CNBC in January, found that most investors don’t even know that these fees are being assessed on their accounts. Even though regulators have tried to pull fee schedules out of the dark at investment houses, many Americans are unaware of what they’re being charged and why they’re being charged it.

At New Direction IRA, we disclose fees up front so that investors can compare and calculate net return. This transparency is important because it establishes trust between the provider and the investor.

We base our fees on service provided, in this case bookkeeping associated with a self-directed IRA account. Our fees aren’t based on arbitrary or hidden expenses, so you know exactly what you’re paying for.

We do not have commissioned sales people nor do we derive any profits from your IRA. The service we provide is exceptional based on its own merits and not contingent on the performance of your accounts.

Perhaps best of all is that NDIRA will provide you a Client Representative to service your individual account. You can contact them at your convenience if you ever have any questions about fees or investments.

Unlike most other self-directed IRA providers, we have an online client portal that you can access 24/7 to view any fees you are due to pay. And you can pay those bills immediately online.

For more information on fees or how to get started with a self-directed IRA, visit www.NewDirectionIRA.com.