Estate Planning Mis-Cues – Amazing but True
This recommendation may seem obvious but I come across it all the time.
The number one avoidable estate-planning mistake made by individuals is failing to name a living beneficiary on all retirement accounts. Regardless of your will, if not done properly with the fiduciary, your estate will be exposed to higher taxes than the circumstances would require.
Without a named living beneficiary, the required account closure distribution amounts are either treated as estate income where the 35% Federal tax rate kicks in at $10,700 or are allocated in lump-sum to the beneficiary via Schedule K-1 and taxed at the individual’s tax rate in the year disbursed.
As a result, generous inherited IRA rules, such as stretching the account withdrawal and related income tax hit, are relinquished.
