INHERITED IRAS - AVOIDING INHERITED HELL

Last Updated:

05/17/2012

The Latest "Hot" Inherited IRA Information At Your Fingertips!

This is one destination that you never want to end up in. Because once there you are never getting out!

Welcome!

I am M.D. Anderson, a long term financial advisor in Chandler, Arizona. My firm does inherited IRA consulting and tax consulting for clients in Arizona, as well as throughout the United States and for U.S. citizens in foreign countries. This is my 37th year of providing multiple financial services to my clientele!

I practice in 4 separate disciplines: Accounting and tax preparation/consulting, certified legal document preparation, insurance brokerage, and real estate consulting. This gives me a 360º view that few advisors can give in your situation. (and a lot of continued education school to attend each year)

To date, since starting my Inherited IRA consulting division, I have saved countless millions of dollars from needless taxation due to bad advisors and bad advice. Sadly, the bad advisors were many times -- admired by your deceased parent or loved one. Your guard can be down if a large IRA account is left to you while working with some of these advisors. Many will tell you lump sum taxation is necessary, when in fact -- most times it is not. But the human element of grieving, or just the stress of estate management can leave you vulnerable. You may not know the right questions to ask before signing paperwork that is not in your best interest, can tax the money instantly, or can fail to reset mortality "age" to your birth date.

If you are younger than the loved one that named you as a beneficiary, the Required Minimum Distribution (RMD) most likely will be less and therefore, more of the money in the IRA can remain tax deferred. However, when a trust is listed as the primary beneficiary of an IRA account, things can go wrong -- fast. Assuming it is an IRS "qualified" trust, you won't be able to use your own age...unless you are the only beneficiary. Multiple sub-trusts are required "per beneficiary", otherwise ALL Required Minimum Distributions (RMD's) will be based on the age of the "oldest" beneficiary listed. (Pray it's not your 85 year old Uncle...)

The trust needs to be a "conduit" trust to be most effective as a recipient of IRA death claim proceeds. And, it must be deemed "see through" by passing 4 distinct IRS rules -- all to reset the age basis for those IRS required withdrawals you must start taking the year after the year of the death. Many trusts reviewed by our firm, post mortem, are not set up properly. Therefore, the hoped for "stretch" desired by the IRA owner is easily lost in real practice.

IRA funds not paid in a lump sum distribution at death can provide income for your heirs' entire life while not depleting the principal sum early on with a good investment program and of course, with the ability to be able to also reset the age for Required Minimum Distributions (RMDs). Being able to use a younger age allows for more money to remain "in house" and away from immediate taxation.

Some of my past clients have said the "M.D." stands for "Mad Dog" when it comes to my tenacious representation of a client as an inherited IRA consultant. I always maintain a professional attitude. But, occasionally I have to "get tough" for a client's behalf. Emily in Illinois penned me as "M.D. Hammer". (She appreciated my aggressive approach when it became necessary) One thing is for sure... I never back down when large financial firms try to intimidate me. (I have never lost an argument since they are always wrong and they eventually always back down or yield)

Along with my associate, Dr. Saul S. Gefter, Esq. - serving as co-consultant on all cases, as well as helping on any legal issue that comes up -- we have combined professional financial experience of over 80 years!

What's HOT in the News?

Our "Wall of Shame" (others' Inherited IRA plans gone astray)

Our Recent Media Mention or Interviews on:

Choate's Notes / Wall Street Journal

JoeTaxpayer.com / Fox Business News

Bankrate.com

LATEST NEWS -- HOT! HOT! HOT!

Congress is trying to stop the "stretch-out" on FUTURE Inherited IRA's!

Well, you could only expect this. Bumbling legislators looking for ways to extract money from your pocket and into the government coffers! Instead of learning how to balance their checkbooks, they just keep looking for easy ways to grab money. This time, it is from the heirs of deceased estate owners who left an IRA behind to non-spouse heirs that are not disabled. (all kinds of qualified retirement plans eventually become eligible and are known as an inherited or beneficiary IRA at death)

In other words, most people would be barred from any long term stretch out of income and tax deferral beyond 5 years in this new proposal. Though it has been verbally stated the provision will be removed from the pending transportation bill by the congressman that put it in there in the first place, it still remains as part of that bill!

If his word is good, it won't become effective January 1st, 2013 for decedent deaths after that date. IF HIS WORD IS GOOD! However, as our graphic shows -- the end may not be far away. The cat is out of the bag. The juicy billions of extra taxation money this proposal could generate will not be easily forgotten.

Just as it is slipped on top of the back of a bill that really has nothing to do with estate or financial planning, it will come back again I am afraid. And, that is why you want to spend a little time consulting with our firm to make sure you know how to get your inherited accounts set up properly before any proposal like this actually does become effective.

For the many we have already helped, the good news is great news. YOU WILL BE GRANDFATHERED! (well in at least the provision proposed that they are pulling back out -- or are supposed to pull back out.)

Confused? Don't be. Read our site content and then set an appointment to chat by phone, in person, or by SKYPE. This is extremely important, especially for those thinking of cashing in inherited accounts this year. DON'T!!! Not before you understand the value of establishing an inherited IRA while you still can. (You would then have the rest of your life to cash it in or take RMD (required minimum distributions) or any other amount you desire, while protecting the balance from instant taxation)

One thing is for sure, we have published the WALL OF SHAME to show just how bad some of the cases can get post mortem. We talk about examples of "wrong" paperwork sent to heirs by their parent's advisors and firms. Incompetent custodians ordering private letter ruling prematurely are becoming "main stay" lately. And, insurance and brokerage firms not knowing how to pay a death claim without triggering taxation, are all profiled in these stories. (These are name brand brokerage and banks you would recognize, but some are not revealed due to client request)

At least, getting the titling right is as easy as registering below and I WILL GIVE IT AWAY so you can discover proper inherited IRA titling regardless of what another advisor tells you.

Many cases have resulted in paperwork that even failed to list the deceased party in the new account titling. It is one of the "no-no's" CPA Ed Slott presents in his great seminars that can trigger instant taxation (if not quickly corrected before the year ends and reporting is done to the IRS). And, that means YOU will be in Inherited IRA Hell with no way out!

So these situations you may now find yourself in, call for sensitive, professional advisory to say the least so past relationships are preserved. But just as important, the preservation of your new inherited IRA money left to you is also kept from instant taxation by the IRS and your state (if applicable). Taxable because you or your advisor/s didn't understand the rules. Or, the advisors (masked salesman?) didn't care about the rules, just the new commission they make on you!

Our inherited IRA clientele present some of the largest accounts with some of the most difficult circumstances possible at times. But with my team of professional legal and tax associates available for advanced tax and legal questions, we punch through the clouds and solve problems that few others have the knowledge and experience to do so. My specialty is trust owned IRA's. When I am interviewed by financial reporters, I share the fact that so many of these large IRA's my clients inherit, are left to family trusts (revocable living trusts) with little or no language to administer them. And, that most of these trusts were not coordinated so the funds can remain in trust and not break the terms* of the trust that dictate distribution and subsequent mandatory closing.

*They call it a legal fiction when the Descendant's IRA is payable to the trust and that same trust stays open even though it says "distribute upon my death" for children/heirs that are NOT minors!!!

My firm's motto is to let YOU determine the timing of your inherited IRA funds. Not the government, not the advisor you barely know, and maybe worst of all - not the "friend" who gave you free advice on how to treat inherited IRA funds. (That free advice can get really costly since the rules for these products are the hardest in the IRS code to understand, let alone follow)

All professional advisors are welcome to resource on this site, as well as all families who are now facing big decisions on how to handle your inherited funds and get the help you deserve from a neutral source that does not have a vested interest such as to earn a commission on your money by selling you something new, or keeping the money under investment management on a fee basis. I only work on an advisory basis for a fee, as an estate accountant to assist those that hire me. My services have been used all over America. My co-consultant, Saul S. Gefter, Esq. also works on a consulting basis and can assist (or help explain) these complicated concepts to your lawyer to help ward off YOUR chances of having Inherited IRA money end up in that dreadful place A.K.A. -- Inherited IRA HELL!

To contact him direct by email on any legal matter, CLICK HERE

To date, not one dollar has become taxable* for cases I take. (If you contact me, a free consultation will determine if you are "IN" or still "OUT".

* Since 1976, I have assisted clients in life insurance & annuity tax free transfers (Under IRS 1035 rules), and IRA direct transfers amounting in countless millions and millions of dollars - without one penny becoming taxable to date.

UPDATE ON IRS ALLOWED ROTH CONVERSIONS

Tax options on your 2011 Roth conversions are still available to "keep" or "revert". DISCOVER why 2012 may still be a good year to convert your IRA to a Roth IRA before tax rates go up and allowed deductions go down.

Just before you begin reading the "content" portion, this handy Retirement Terms Dictionary is provided as a link for any terms you may not fully understand. (Just don't forget to hit your "back" button so you can keep reading)

INVESTOPEDIA'S RETIREMENT DICTIONARY

Do You Like Presents?

I have one for you!

Missy here has a present for you but you better open it before it is too late. You see, the Inherited IRA Hell I am talking about is completely avoidable if you take the right action BEFORE a big IRA owner dies. Before, you're fine.

After, you could easily end up in Inherited IRA Hell as an heir. What is the hell? It is being stuck with needless federal and state income tax on your beneficial share of qualified funds (IRA, 401-k, TSA, etc.) left to you by your deceased loved one but indirectly since the death benefit must be paid first to their living trust!

Because this procedure is becoming more common, especially on larger IRA type accounts, having advisors who were not able to find a way or know a way to avoid income tax on the proceeds can become toxic after the death. It is a big mistake to leave any qualified funds to an IRA for most people and their situations. Yet, I get a case almost every week with trust owned IRA proceeds and most of the time -- heirs that contact me feeling they have not choices other than what others are telling them they have to do.

Sometimes, this scenario is due to your (or your relative's) current money advisors not being informed or experienced enough to give the professional advisory EVERY client deserves. In other cases, sadly, it is because they are too greedy to ever help you avoid paying the high taxes due when a trust becomes a direct beneficiary of the qualified funds death payment payout! By telling you to take a lump sum, they try to influence you to "stay" with them and invest what is left over with them after the IRS and state tax authorities get done "reducing' the money down as much as 50%!

There is a much more common way you as an heir can end up in Inherited IRA Hell and it has nothing to do with beneficial death claim payments direct to the decedent's living trust. It does have everything to do with uneducated or incompetent financial advisors who will wrongly tell you that the IRA money has to be taxed, even if the situation is less complicated!

Since, 2001 when the IRS added some really neat features to IRA options after death, (obviously, of no real benefit to the deceased IRA owner) money advisors, accountants, financial planners and so called "estate planners" do not always get it right. Then the features and options you deserve as heir can either die with the IRA owner or not be presented to you as an heir after the death!

In fact, I would bet that the information you obtain on this free Inherited IRA (A.K.A. Beneficiary IRA) information website will bend your ear all the way down to your wallet if you find out more options, after the fact, then what your IRA advisor(s) told you were available to you regarding your share of an inherited IRA. Especially if they have already caused full taxable income from your inherited IRA!

Malpractice and malfeasance in this area of financial advisory and practice is becoming legendary. In fact, if you are a law firm owner and reading this information site, I would give you the free gift of suggesting this new area of practice you should do really well in, even if you start from scratch since heirs are being mislead and victimized every day all around the country.

That is because an estimated 20 Trillion dollars in qualified funds* still remains "after" the 2008 market crash since values have had some great market performance lately and have recovered nicely. All that money is now resting in the hands of both Baby boomers and Mature Adults here in America! Let me say that a different way:

$ 20,000,000,000,000.00 !!!*

* "Qualified funds" is an IRS term for ANY tax favored money that provides a retirement benefit to you and is under special rules. The opposite is "non-qualified" funds which do not get special tax treatment, but also are not restricted as far as when you can draw money out without a penalty, taxation, or both penalty and taxation at ordinary income tax rates.

The game is on for all of the financial advisors in America to try and get a "cut" of all of this Qualified funds money as it changes hands! Some will offer you fee based management, some will offer you commission based products, and some will offer you both. Roughly, 60% resides in equities and the other 40% in fixed account type investments in our country.

And, back on 12/28/10, the Boston Herald quoted that 10,000 baby boomers in 2011 will hit retirement age each day -- for the next 19 years! Adding in their own 401-k, SEP, 403(b) money with what they inherit from parents, the total sum for some families will be overwhelmingly the highest percentage of their estate assets!

What is important here is that too many advisors are just plain dumb about the taxation issues! And, because they are not tax experts, and few are IRA experts (though some took a class that says they are), bad stuff is happening as this money comes out of the estate settlement process. Law firms farm accounting tasks out to CPA's on larger estates. Even CPA's have been sleepy, but they are waking up fast! Many read this information site and respond to me knowing they can count on the information we publish.

Instead of using the "S -- T -- R -- E -- T -- C -- H" IRA concept and investing in a new "Inherited IRA" account with the current or proposed account heir -- still too many money advisors often tell the heir after the death to pay taxes on the money and invest the rest with them! This can amount to a 40% cut for the IRS and state taxing authority and a 60% remaining cut for the new account owner. Many times, professional advisory isn't sought out and thus needless taxes are paid on these IRA transfers that often are very large -- and Inherited IRA Hell stays very busy with new arrivals of victims every day!

Now, if you are a commission based seller of a product (we hope it is a good product of course) -- which pays more commission on an original $100,000 IRA account? The full $100,000 in a tax free transfer? Or the remains after taxation at about $60,000? And if you are a fee based investment advisor (and therefore hopefully properly licensed), the same logic works for you too! Don't let your lack of tax knowledge cut your commission or fee income by about 40%!!!

So, money financial advisors are being foolish twice, are they not? They let the client lose needless tax money up front, and therefore, they allow themselves to loose "money under management" as well, regardless of how they get paid!

O.K., I didn't forget about you heavy weight advisors with years of experience who are running those ads in the paper telling people they are best to sell out their IRA accounts, pay the tax, and invest with you. Do you have it right?

NO! YOU DON'T KNOW WHAT YOU ARE DOING...

The truth is these guys are usually just selling life insurance with high first year commissions and really don't understand the damage they are doing to their client. And, they ignore or are not wise enough to understand the concept of a potential perpetual increasing income stream on an increasing tax-deferred principal base for almost an entire lifetime. This concept is also known as the "super stretch" IRA, which in reality is a money tree unlike any other you could ever imagine!

Those advisors in a hurry to convince you to pay income tax on any kind of IRA or 401-k/403-b money, etc. -- might just be in a hurry to get some commissions out of you. Very few professional financial advisors would tell you to "kill" what is now becoming the greatest money tree in history! What I am saying is that the IRS allows your IRA to grow to unbelievable amounts even when required minimum distributions must come out each year. The longer government standardized mortality tables (Newest is the 2001 CSO Mortality Tables) just made it even more lucrative to keep this money tax deferred all of your life and then let your children continue your "Inherited IRA" after you are done using it. Only foolish or uninformed advisors tell you to cash them in!

I am an experienced, tax smart financial advisor and consultant that truly understands the magic of a STRETCH IRA concept. I can help you achieve perfection in the process of receiving your new Inherited IRA type funds. The hardest situation you may be in is my normal routine. Since the field of Inherited IRA consulting started in 1998 after a favorable private letter ruling from the IRS, I have been active and specialized in this field.

You can usually keep the money with the same investment firm (sometimes it has to be transferred out to avoid taxation) that your deceased loved one had it with. Or you can transfer the funds to another brokerage account or firm as long as they agree to receive the funds based on circumstances (Inherited IRA funds paid to a trust are extremely limited to who will take them, or keep them).

For Example: Both J.P. Morgan Brokerage & Schwab will not allow new Inherited IRA money inside a trust, if division amongst the beneficiaries is desired !!!

A recent case with J.P. Morgan further restricted trust owned Inherited IRA RMD's to the decedent's age! (Top Inherited IRA Lawyer & Expert Natalie B. Choate would call that a "Tragic" misunderstanding of IRS policy and law.)

When desired by you or warranted by circumstances, many other new investment options in the "fixed" category are available to you that can better protect your principal invested. These exciting options again allow you to AVOID PAYING THE TAXES UP FRONT!

One fine alternative that is guaranteed to protect and preserve your principal - is the Fixed Index Annuities offered by legal reserve insurance companies! For safety sake, we serve as insurance carrier "broker" for those wanting to tuck their Inherited funds into something "safe" and that can not loose principal if held to maturity via fixed indexed annuities, but we do so at "arms length" and only when clients ask us to show them alternatives to variable IRA investing. (subject to states we are licensed in or become licensed in)

The main importance right now is to find an advisor who understands what they are doing and... who they are doing it for. And, an advisor who knows the specific companies who will be willing to receive your new "Inherited IRA" account funds and take care of you the best way possible. In other words, he or she knows from experience which companies are best suited for your needs and is trained and experienced to handle these accounts. Since advisors and firms are not fully up to speed in this extremely complicated area of finance, you will need to shop for more than just the best "rate".

HOW WOULD A PROPOSED "FLAT TAX" AFFECT MY INHERITED IRA ACCOUNT'S?

Hey, Don't Accountants & Lawyers Fix These Things?

Yes and no. Yes, they can usually stop the needless taxation if they are consulted early and if they practice in this area. But, no, they usually don't get asked to help until it is too late. Once the IRA money is on fire, it is too late!

You see, many times, the existing investment advisor/agent/consultant/banker may be good at picking stocks and bad at understanding tax issues and their implications. And, many don't want to lose control, so they tell you the money you inherited has to be taxed! They do this because they want to control the estate assets, or at least the big IRA account, and not lose the management of the money when their client dies. Others tell you this because they are inept and haven't ever studied the new IRA rules properly. Sadly, some just don't care at all about preserving your capital. If you feel you are a victim to brokerage/advisor abuse, also take a look at: www.PreserveMyCapital.com.

This lack of knowledge, lack of caring, or outright abandonment of normal due diligence creates huge problems as well because outside accounting and legal advisors get "bumped" from ever being in on the discussion until it is too late. When is it too late? When the check is cashed according to strict IRS rules! Only Inherited IRA Hell awaits after that...

Do you like what you are reading? Would you like to learn more, including the exact wording you must use to title these "Inherited IRA" accounts with? Well, stay tuned for more very shortly. I am giving all of this information away on the internet for free with two conditions. First, I must ask you to become a registered guest. And second, I ask that you tell others about the site. If you will do that for me, you may register and keep reading instantly!

FOR INSTANT ACCESS TO MUCH MORE CONTENT, PLEASE REGISTER NOW!

Would you be willing to register to be allowed to read on? Just fill out the form below and click Submit. You will then have instant access to the extra content. Much more important information and management tips await you. You really need the top 10 rules you must follow to administer an IRA, because without them, trouble may be right around the corner. And, it is all free with no obligation! No delayed email connect either -- just register and you will have INSTANT ACCESS to the main content of this site!!!

NOTE: YOU ALSO MUST REGISTER TO READ OUR REPORT ON THE POSSIBILITY OF GOVERNMENT TAKEOVERS OF YOUR 401-K, IRA, OR INHERITED IRA ACCOUNTS.

Or, if the flames of Inherited IRA Hell are being felt by what you have read so far, and you want to talk to a "real" IRA expert and tax consultant right now, just E-mail me or call me toll free:

1-800-782-2806

(There is no charge for your initial call!)

Thanks for coming to this important information site! Please let me know how I can help you. Good Bye for now.

Sincerely,

M.D. Anderson, President
Financial Strategies, Inc.

CLICK HERE: To E-mail and register your name, and contact phone. If you desire, you may also give us a brief review of your situation, story, thoughts, or comments before you forget!

Or to request instant service or an appointment (phone or here in the Phoenix Valley). IRA Hell waits for no one, and time may be of the essence in your situation.

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Disclaimer: The information contained on this site, though deemed reliable and accurate, is solely the opinion and statements of the advisor profiled. Therefore, it should be considered "general" in nature and no action should be taken based on this information until such time your specific situation and circumstances can be reviewed and analyzed by competent and qualified tax, insurance, legal, and/or other financial advisors. This information is not intended, nor should be construed as legal advice. FSI can not and will not give you legal advice. If you need legal advice, we can refer you if you desire and request it. FSI is a long-term Financial Advisory and Arizona domiciled Corporation since 1990. Some services profiled herein are available only to Arizona residents. Communication with an Arizona Certified Legal Document Preparer (AZCLDP) are private and confidential but are not "privileged", such as they would be with an actual Lawyer. We maintain a privacy policy, which can be requested by contacting us. Mr. Anderson is also an Arizona accountant/consultant, Arizona licensed Professional real estate agent and he can answer general estate questions you may have as well, pertaining to real estate issues that may come up during the estate settlement process. (Or any other Arizona real estate need or situation) He also is a licensed insurance agent and corporation for any life, health or annuity needs you may have or questions regarding current insurance/annuity plans you may not currently understand.

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