Long Island Elder Law & Estate Planning

Americans hold huge sums in retirement plans; for many, their 401(k)s and IRAs make up the bulk of their retirement savings.

You worked hard to build retirement savings – make sure you avoid these common mistakes:

  • Failing to take distributions on time.  Absent any other estate planning strategies, you must start taking distributions from an IRA at age 70 ½.  If you don’t take the required distribution, you pay a 50% penalty on the amount you should have withdrawn.
  • Delaying distributions.  If you are still employed you don’t have to take a distribution from your current employer’s plan, even if you are 70 ½, but you are required to take distributions from IRAs and 401(k)s from past employers.  If you don’t you’ll pay a penalty.
  • Failing to designate a beneficiary.  If you die without naming a beneficiary, the IRA custodial agreement will specify who receives the proceeds.  That agreement also may specify that proceeds be paid out relatively quickly, creating a larger tax burden for your heir.  Designate a beneficiary and leave benefits in an IRA Trust to control to whom and how quickly funds are distributed.
  • Leaving non-IRA funds to charity.  Charitable organizations do not pay income taxes on qualified IRA distributions, but your heirs will.  Leave IRA funds to charity and “non-retirement funds” to your heirs.  In many cases, you can minimize or eliminate the tax burden on your heirs through effective estate planning, especially if you bequeath non-IRA or 401(k) funds.
  • Tying up assets in problematic investment types.  For example, you may have a portion of your IRA in a CD.  If the face value of the CD is sufficiently large you may have to redeem the CD early in order to take a required distribution.  As a result you may pay an early withdrawal penalty.
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About Mark S. Eghrari, Estate Planning Attorney

Mark S. Eghrari is an attorney in private practice in Smithtown, New York. He has been in practice since 1988. Mark S. Eghrari provides extensive estate and tax planning services to individuals and businesses. Mr. Eghrari’s primary focus is helping clients avoid probate, minimize or eliminate Federal and State Estate taxes and protect their assets from the high cost of nursing care, if they become ill.