IRA Beneficiaries

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I'm sure I'll see if Pete insurance this show does not offer investment products or investment advice welcome to finishing well what certified financial planner, Honshu, Ohio, and today were talking about IRA beneficiaries and and you might think about talking if it all show. Well I got were loaded for bear on this, but I can assure you, you will be amazed at all that we can talk about today.

I've learned so much just from watching the video, but you know, one of the things I got encapsulated for me about IRA beneficiaries.

As I watch the video Hans was Tom said something that wow that makes perfect sense.

He said that IRAs are cramming our lousy wealth transfer devices and as I thought about that. It's really at the heart of of so much what were to be talking about today, but it made me think about our faith transfer devices and all the lousy ways that I've done about trying to share Christ with my family, but it I think one of the great ways that that is not a lousy faith transfer device but a great weighted to transfer your faith. It says in the hundred 19 Psalm that thy testimonies are wonderful. Therefore, my soul keep with them.

In other words, you keep stories in your heart of your family and so I remember when I understood this. I asked my parents. My mother and father both with a ride out there testimonies and and my mother took me right upon it and wrote you know a very long detailed explanation of all that she went through and of course, reported that there are ancestry in my whole family means like a treasure and and we all know how how that happened for my mother but unfortunately couldn't get my father to do it. As I push to me. He told me the story, but he wouldn't writer you notice just how it went and I see I've always felt like man I was gonna get ripped off and it came to my dad, maybe at some point I'll write it out as is I know what it is but I just would urge you write that that that you take your testimony because at that your family souls will keep with them okay to write out your testimony. Maybe it with your your important papers.

Your will and all that stuff in and give it to the next generation. Can it really is your legacy right Hans. It might have been in the meeting room of a well the first thing you know when you're in an AA meeting and you're going through in your work of the staff.

I mean God's right there God in charge in your unit.

Turn your life in your problems and your addiction over to God and so that immediately takes anybody in the program right to the point they can make a decision about this because God is one. And he came through big time for you and that absolutely absolutely just like it says in the program. In the process. Is there and you just outwork the steps in God is in charge, but immediately brought me back there when you tell the story is getting ready to show them your talent again that my testimony and a lot more to it and but but it did. That for a nap well, and encouraging grand write that out as distinct oppressions that would be two children is at some point time, they may face.

Something I remember.

Oh yeah, my dad, you know that your it's great absolutely. So this idea beneficiaries. This cataract is made a lot of changes that will and talk about today. Right what we do here at unit loaded people don't know beneficiaries were before the secure act, and they certainly don't know. Did he and you know I want to keep everybody around because it felt like that thing of material, but the first thing I'll say is that 20 3040 years ago when I was start in the business and I was a young person started to accumulate money in my own 401(k).

Most people in America didn't have money.

They just know most people have pension or a lot pension available to them so they work and some people still do, but you know if you think about your parents and your parents or grandparents if they work somewhere along time.

They have pension come into that pension. After working there a number years would pay for the rest of their life, no matter how long it will. And then it would also have a benefit for the surviving spouse and a lot attentive is the man and the man would die and the wife, the widow would get some portion of the pension for the rest of her life and then when people would pass when both of them were gone there is nothing payday. There's no money there. It was just that it was a paycheck for life and what would happen in the 70s is all of the defined benefit plans are the pension plan not all that many of them started to go away and they were placed with the 401(k). The IRA simplified employee pension and all the different things which are all defined contribution plans.

We are allowed to put some money aside and I get a tax advantage for the which is all intended to replace the pension and for that reason, spouses have the highest beneficiary status. So in other words, my wife, who is the beneficiary and she is my spouse on my plan and then me on her plan. We have the highest status of given the most tax advantages of distributing IRA monies for the best class of beneficiaries and that remain constant, but what will I want to be clear is people in the modern day have accumulated a lot of their well in some cases there only well is in that 401(k) or another way. I have all kinds of people coming to me with 500,000 800,000 million million three between the two of them in their 401(k) or their IRAs and they never pay tax and he is mine, and then they have maybe 10,000 or 20,000 of money that is not an and I maybe have 100,000 but compared to the IRA balance most of their well and so these people when they start approaching retirement. Most of them don't want taking money out of it because they really like seeing that balance next to their name makes him feel wealthy and they know they have paid taxes and something of a resentment against the 72 they got to start taking the minimum amount of money now and so what were talking about today is if you're successful in keeping a big balance in their pretax or post-tax. If you have an error for your whole life and then you leave it to your children, which is where it ends up in most families within the secure act has made it more difficult for your children to spread the taxation over a lifetime. So began I don't really want to talk too much about whether I like this. I don't like it because it really doesn't matter because it a lot if the regulation but I do want to make people aware of this and aware of the rules so that we can take it back in event planning and they can plan out their whole IRA distributions. The money for the spousal money to give flesh to the kids and they can be smart about and they can be good stewards of their money. So yeah, I think. I think it's helpful to think through that now here comes this million dollars or 500,000 or even if it's 50,000 okay if it comes in one year and one lump sum then you can apply to whoever's receiving it in this unbelievable tax bracket versus being able to spread this thing out over a period of time and this is where this cataract really moved in to kinda push IRAs back into that pension status in their own way to say that these were designed for you to live in retirement. They were designed as a wealth transfer instrument and so like you always talk about this that you know we need to plan how to spread this out during our lifetimes, so that that that are errors get the full benefit of of her assets right yeah and so when the IRA. It all kind of, and there really put in the same place.

The IRA owner so they can stretch it over their lifetime. They can delay until 72 minimum distributions they can recalculate life expectancy every year I mean the whole rule for spouses.

Rick really is unchanged. In the new law and it's good end of it because the spouses values taken care of in the pension why people have in fact the spouses better off in the beneficiary of an IRA because they get the whole thing, as opposed to many pensions get cut in half went with the surviving spouse. So the spouses and the issue here than that spouse that inherit that the path of the net positive name beneficiaries and system related. When the spouse dies against your genetic inheritance and that's where the big changes. There used to be one way that was handle 2019 before and under the secure act for death 2020 and after it different and less favorable so I want people to know what that is, when there plan their beneficiaries and their plan and how they manage their IRA so really we touched on the video, which began as it did Cardinal guy.com and so all this that were talking about is a cardinal guy.com and again under the IRA worry and this is really talk about us.

Please guide to planning for and living in retirement.

It's all there cardinal guy that commonly come back, moron, beneficiary, Hans and I would love to take our show on the road to your church and Sunday school Christian or civic room. Here's a chance for you to advance the kingdom through financial resources by leveraging Hahn's expertise and qualified charitable contributions veterans aid and attendance IRA Social Security care and long-term care. Just go to Cardinal guy.com and contact time to schedule a live recording of finishing well, your church, Sunday school Pacific. Contact time to Cardinal guy.that's cardinal guide.com welcome back to finishing well a certified teacher planner Hans Schild and today we are talking about IRA beneficiaries and that I just before we go much further on the idea is one of things about IRA beneficiary sconces. People need to designate them rightly need to get that recurrent and right in and know what they're doing the right will only would we want to drive changes people have been apathetic about their beneficiaries and they just haven't looked at them in a long time coming, so that you do. But before that gives some reason. Look at so the secure act was passed in 2019 and became law and it started beneficiaries of beneficiary portion of it started with death 2020 and after. So if you had your parents passed away near the beneficiary there IRA 2020 and after your under the new rules under the secure act if they died before 2020 and you've been receiving payments you received an IRA payment. You didn't take it all in your stretching it your grandfather again. So don't be worried about that but I want to explain spouses talk about spouses, the spouses are in a really good position to do a lot of things but it somebody has espoused where work with her other spouse passed away good time to call me to explain all these options to what I really want to focus on today and where the big change was for beneficiaries that I so before 2020.

You were able as a beneficiary to stretch out the payments or the withdrawals out of the IRA and then stretch out the taxes. More importantly over your whole lifetime or your life expectancy so whenever your parents died and you were the beneficiary that was age 56. You got a table and that you're going to live till my life expectancy 82, than you got 26 years to stretch that money out over and this is comic formula and if anybody's in that they want to help with that is calling out, I'll be glad to go to the mat is a pretty good deal and e-reader allowed you just can't get a check for a whole bunch of years and not pay a whole lot of taxes and spread them out of your life. What they decided no more. Okay they created with this cataract. They created really two more classes of beneficiaries which the nonperson was out there beforehand, but the two more classes in the nonspouse eligible designated beneficiary PDP and then you have the nonspouse non-eligible designated beneficiary. That's a lot of work, so what it amounts to is they created a class of eligible designated beneficiaries, which is, special class, and that includes minor children under the age of 21 but he can't be grandchildren needs to be your natural children of or disabled can be children or adults.

The chronically ill. For someone who is not more than 10 years younger than so that could be a brother or sister in the same generation. So if you're that classification of beneficiary fit into one of those when you've got a certain set of rules that you can follow which are similar to the spouse with nothing and there favorable so they break to minor children disable either children or doll chronically L or was usually a brother or sister that's not more than 10 years younger. The ability to stretch this out on the light for everyone else that the beneficiary is a person they put in the �10 and so the 10 year rule is a long complicated.

Okay, but what it essentially says is you got 10 years to emptiness IRA and what it says in the law is you can take nothing for the first nine years and like grow tax deferred. And then in the 10th year.

You gotta have it emptied by the end of the 10th year she could take it all out here for you could take it out. It 10% a year until advantage your you could take a whole bunch out here you can spread it out anyway you want to go the empty bed and again here it appears that you know something about this. We just described to you as well is that it is not well-trained, it wasn't designed to be a wealth transfer device.

It was it was designed to take care people like through attention, but how cool better that intention. You know, because I teach special needs of the school and and we have all the students that are in a summer in their 60s. Now I'm I guess one that's getting close to the 70s and so his parents were they to have an IRA and and were taking care of them innovate. They could continue to distribute this thing out for a much longer time to take care of somebody like that either a minor child. In this case a disabled or somebody that's got a disability and I even love the brother and sister. You know, because I I can see where that would be a situation where you literally have kind of taken care of her brother muster life in you and your left an option to continue to do that. I really think that was thoughtful on their part but your brother and family so give them the benefit of stretching.

Now there's more ramp occasions when you leave money to a disable what is now an adult child, but we will get into that today with the IRS. Given and the law. The secure act is given special treatment to the so now thought about everybody so 10 year rule is much more prescriptive than the old structural and then it also got another provision they threw in this year which we talked about on an earlier show is it person who died was already on minimum distribution means there were 72 or over that which is a lot of times the case then you have to continue taking required minimum distributions under your age or your life is complicated by create that in addition to the 10 year rule so you can't leave all the money there till the 10th year and then take it out. You gotta take a little bit recorded this new provision so want you to get and understand that is more restrictive for people who went other than the spouse that inherent money to IRAs and frankly that a lot of the lighted path of the next generation. IRA money because that where most people have most of the money so they get back to it, that in the video which you commented on languages that an IRA is really a lousy wealth transfer device and it has a beneficiary they are going to get the money from a practical standpoint is fine, but from a tax standpoint access to the money standpoint of care and there's other ways, starting with an you know, I asked people. A lot of times it was a pleasure IRA.

For with the four every chronically people have a hard time coming up with anything to it or leave it all in their head from a kit for you kids, you know, I can tell you multiple strategies that we could sit down. Now you're in your 60s and 70s and plan in such a way that your kids can get tax-free or money after your death in an expedient way and then I can have the tax bill attached. Interestingly hi.

The worst of the classifications are the nonperson entity right of people make the mistake of leaving that money in their state or put it in a trust. If it's an IRA man. That's it. It's all gotta go away. We email video to our old customer load to a guy call me on Wednesday.

Never talked to before Jesus on our legacy had called and talk to somebody here given us his email are his email address and he is done exactly that. He went to an attorney. Gotta try his daughters not real reliable and would squander the money so he set up the trust for all his assets and the trust as the beneficiary of the IRA and when he read that nonperson beneficiary five years and then when I told him when trust tax rates are about charlatans that were taken him on his new client coming in the state is not a good bit date for a trust is not a good beneficiary � most people but interestingly I'm wondering in that case right if you took some of them money out of the IRA early created life insurance.

Is it possible to make the beneficiary, life insurance, then some kind of trust. So to make sure that it is so, and it also awaited the cross that that's what you really want to do.

We can set up. Trust that retain their beneficiary says that if you don't notice if your trust is for an IRA friendly trust in you don't have one set up a meeting. We we we can do that as well is if people want to have overstepped control over the distribution of their asset and they want to leave money in an IRA and we can set that up. But it life insurance is a whole life easier when you and a lot of people end up buying life insurance from me and spread the payments out over 10 or 20 years and then there making the payments on the distributions from the IRA so that they create an ultimate tax-free death benefit going to the kids and then we could also set up a settlement option inside a life insurance with a will have to do a trusted life insurance and create a trust life will just send the kids a check every month for the rest of their life for 20 years or something behind most of them tax-free in the really cool thing. I like that idea. I guess because this is part of me that just as you know how silly she died three years into the deal.

Then the IRA money for the most part still there and your beneficiary gets all that money right absolutely want the law and know about the 10 year stretch and then you go to jackets if they get if they get all that money to life insurance policy, then the gotta pay some taxes on the IRA will hey they got the money to do it. You better. So yeah I hate were a time that we are so we want to remind you to go to Cardinal guide.com and C7 worst had today's raise the IRA in their show notes. It's got all sorts of ideas on this tenure rule and all sorts of informational resources on theira@thewebsitecardinalguide.com thank you Hans great show. Thank you.

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