# If you have multiple IRAs, read this!



## StarSong (Jul 12, 2020)

My husband and I are probably like a lot of you.  IRAs came about during our working years and our parents, friends, financial advisors, politicians, etc., strongly recommended this vehicle for retirement savings.  They were all the rage.  401ks either didn't exist yet or were pretty rare.  Pension plans were disappearing.  So IRAs were the way to go.

Every spring DH and I duly funded personal IRAs. Did that for a long time. Are you with me so far? 

Recently my much-beloved father-in-law passed away. Included in his estate were two smallish IRA balances, both held at the same financial institution. Total $12K maybe. Each was to be distributed to three heirs. 

 My friends, I am here to tell you that the process of getting money from an inherited IRA is not for the weak in spirit.  The paperwork is not to be believed. (You have to create a new IRA then roll the money into it, even if you want to cash it out.)  

Freshs set of paperwork for each IRA and each heir.  So six sets of paperwork all told.  Ugh... 

Really and truly, we sold the houses in these estates and distributed those funds with far less ado. 

While hubby and I aren't about to cash in our IRAs just to avoid possible paperwork issues for a surviving spouse or children, we are going to consolidate our IRAs as timed investments come up for renewal. Leaving a couple of sets of IRA paperwork to wade through upon our demise will be much less onerous than a dozen or more. 

Just offering the benefit of my experience and sending out a word to the wise.


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## Don M. (Jul 12, 2020)

We have everything set up in a trust, so the kids don't have to fight weeks or months of Probate.  Also, it was recently announced that any IRA funds left to survivors must be used within 10 years.


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## StarSong (Jul 12, 2020)

Don M. said:


> We have everything set up in a trust, so the kids don't have to fight weeks or months of Probate.  Also, it was recently announced that any IRA funds left to survivors must be used within 10 years.


I'm talking about transferring the IRAs themselves @Don M, because they cannot be included in trust assets and are handled differently.  

The two estates we closed both had very well written trusts so anything within the trust - and even a few things held outside the trust - were easy to manage. 

I had no idea what was involved in inherited IRAs. You might want to look into it for yourself.


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## Aunt Bea (Jul 12, 2020)

I would also look at the pros and cons of naming beneficiaries on the IRAs instead of having them become part of your estate and then distributed.

https://www.estateplanning.com/Beneficiary-of-Your-IRA/


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## StarSong (Jul 12, 2020)

Aunt Bea said:


> I would also look at the pros and cons of naming beneficiaries on the IRAs instead of having them become part of your estate and then distributed.
> 
> https://www.estateplanning.com/Beneficiary-of-Your-IRA/


Interesting.  I didn't know it was possible to make a trust the beneficiary, but when reading further, doing so looks like it could cause as many problems as it solves.  Maybe more.  

Upon someone's death all accounts have to be managed in one way or another. IRAs just turned out to be an unexpectedly royal P in the A. Consolidating them would reduce the number of times heirs would have to go through the process.


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## Lethe200 (Jul 12, 2020)

There is an automatic fee for closing an IRA. Without exception every financial institution used to charge $100, back when I was working for a CFP's office. 

Not a big expense, but annoying and unnecessary if a deceased has multiple IRAs that could have been consolidated.

Consolidation is easy for an IRA owner to do. If you inherit an IRA, be SURE to have it titled correctly! It's one of those IRS rules they are very very very sticky about!

Make sure your heirs know that *if you were taking distributions, they must continue taking annual distributions as well*, but based on their age, not yours. I believe if the IRA is to be split between multiple heirs, the determination is the eldest heir's age, but since IRS rules can change you should check this. 

And warn heirs to be careful not to rush to cash in an inherited IRA. Remind them that if it is not a Roth, then all withdrawals are subject to income tax. 

You'd be surprised how many family members we saw that totally forgot about these "gotcha's" when it came to settling someone's estate. In one case it was the *executor of the will, *and hundreds of thousands of $$$$ from the parents' estate ended up being taxed at normal income rates for all three heirs!


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## StarSong (Jul 12, 2020)

Lethe200 said:


> *There is an automatic fee for closing an IRA. Without exception every financial institution used to charge $100, back when I was working for a CFP's office.*
> 
> Not a big expense, but annoying and unnecessary if a deceased has multiple IRAs that could have been consolidated.
> 
> ...


We paid no fees for closing my FIL's IRAs.  As far as I know, my own banking institutions will not charge me to consolidate IRAs that I hold with them as long as I do so during a rollover period, but I will look out for that.     

DH & I want to make whatever we leave behind relatively simple for our children to sort out. After watching us recently execute two estates, they know the value of professional financial advice from their (or our) accountant and our trust attorney before moving forward.


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## OneEyedDiva (Jul 15, 2020)

You and your family have my sincere condolences on the loss of your beloved father in law.  My IRAs are in two brokerages. My beneficiaries are named for those accounts. I don't know if that will make it easier but my heirs will have to work it out. I'm guessing they will get it done for the hopefully nice "chunk of change" they'll inherit (hopefully...if illness doesn't eat it all up).


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## StarSong (Jul 16, 2020)

OneEyedDiva said:


> You and your family have my sincere condolences on the loss of your beloved father in law.  My IRAs are in two brokerages. My beneficiaries are named for those accounts. I don't know if that will make it easier but my heirs will have to work it out. I'm guessing they will get it done for the hopefully nice "chunk of change" they'll inherit (hopefully...if illness doesn't eat it all up).


Thank you for your condolences.  He was a truly wonderful man.  Kind, gentle, warm, and generous. He had a charming sense of humor - mostly at his own expense, never cruel, mocking or sarcastic.  I cannot ever express how blessed I was to have married into my husband's family.  

With regard to the IRAs, my surprise was that all the paperwork had to be repeated - chapter and verse - for both IRAs, even though they were both CD type IRAs, held in the same institution with the same beneficiaries. That's why we want to consolidate whatever we have within each financial institution. The surviving spouse (or our kids) will go crazy managing those reams of paperwork.


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## Knight (Jul 16, 2020)

Wills written with specific language & IRA's coordinated to comply with the wills. There will be probate probably lawyers cost will be 1% on the inheritance. No tax here on inheritance so while the probate process will take awhile our sons are well off enough to wait.


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## StarSong (Jul 17, 2020)

No probate if you have a trust @Knight.  At least not in California.  IRAs were outside the trust, but carried the same heir designations and splits.  No probate process there either.  

Our legal costs have been about 1/2 of 1% of the estate net value, maybe a bit less.


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## Sunny (Jul 17, 2020)

Thank you for this very helpful advice, Star.  I recently consolidated several IRA's, just to keep things as simple as possible for my children when the time comes. I didn't know all that about the paperwork.

I will speak to someone in the brokerage to make sure that things are in order.


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## Myquest55 (Jul 17, 2020)

I, and my siblings, are going through this now too.  We WERE named as beneficiaries and it was outside the trust.  So, the IRA must be split into three separate IRAs - one for each beneficiary.  *New laws say we have 10 YEARS to empty the account!! * (Lethe200 - that applies to ANY IRA-activated or not)  You can take it in a lump sum but all the proceeds are TAXABLE income.  So, to spread it out over 10 years, means a lower impact on our annual tax base.  At the end you will get a check (or deposit) with whatever is left and the account closes.

So far it hasn't been too bad but has taken a lot more time that we thought is would.  We also ran into the new, Covid-19 affected, law that my father wasn't required to take an RMD this year.  IF he had taken it earlier in the year, the proceeds to each of us would have been as a non-taxable gift but now it has been left in the account which raises the total to be taken.  ( Probably not overly significant except they kept telling us we would get the RMD before they split the account up.)  Now - we won't get anything until the final paperwork is complete and we have each decided how we will take our distributions as well as setting up our own beneficiaries for the new account.


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## WhatInThe (Sep 18, 2020)

OneEyedDiva said:


> You and your family have my sincere condolences on the loss of your beloved father in law.  My IRAs are in two brokerages. My beneficiaries are named for those accounts. I don't know if that will make it easier but my heirs will have to work it out. I'm guessing they will get it done for the hopefully nice "chunk of change" they'll inherit (hopefully...if illness doesn't eat it all up).


That's what I did. Filled out/designated beneficiary forms. Which are pretty straight forward and you can change them for free by updating yourself. Also makes a little tougher to contest. I'm making sure some don't get their hands on my money. Every account/policy I have I predesignated beneficiaries. Personal possessions and house are another story. 


In some way I'd educate your heirs without getting into the will, who gets what , why etc about IRAs and brokerage accounts. Most will get the contents of an IRA account not cash. No big deal sell and pay the associated taxes if one wants-it's free money. But I know greedy psos that pop gaskets when they find out they wouldn't be mailed a check from the broker. 

If your heirs make it to 55 then it's best they take possession and rmds during the first year. Those under 55 don't have to make immediate decisions. It would be best to get things in their control asap.


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## OneEyedDiva (Sep 19, 2020)

WhatInThe said:


> That's what I did. Filled out/designated beneficiary forms. Which are pretty straight forward and you can change them for free by updating yourself. Also makes a little tougher to contest. I'm making sure some don't get their hands on my money. Every account/policy I have I predesignated beneficiaries. Personal possessions and house are another story.
> 
> 
> In some way I'd educate your heirs without getting into the will, who gets what , why etc about IRAs and brokerage accounts. Most will get the contents of an IRA account not cash. No big deal sell and pay the associated taxes if one wants-it's free money. But I know greedy psos that pop gaskets when they find out they wouldn't be mailed a check from the broker.
> ...


My son and oldest grandson know all they need to know about my investments and who gets what percentages of each. I'm in the process of making sure those who were named beneficiaries are aware but I have not told a couple of my grandchildren for good reasons. My son and grandson will make sure everyone gets what'd due them if I haven't told all the heirs by the time I pass. If I live a few more years, I will tell them myself.


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## Liberty (Sep 20, 2020)

Don M. said:


> We have everything set up in a trust, so the kids don't have to fight weeks or months of Probate.  Also, it was recently announced that any IRA funds left to survivors must be used within 10 years.


Ditto for us...the only way to go if you care about such things.


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## AnnieA (Sep 20, 2020)

Thanks for this info! I don't want to leave a mess for my nieces and nephew.  Sounds like I've got paperwork in my near future....


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## StarSong (Sep 20, 2020)

Liberty said:


> Ditto for us...the only way to go if you care about such things.


Same here.  IRAs can't be in a trust, though.  Our assets are set to be divided equally between our children.  The point of my original post was to warn folks about the paperwork hassle of inherited IRAs.


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