Are Families Ready for the Updated Estate Law Regulations in the United States?
It is critical for every family to make sure they are prepared for the future. One of the most important aspects of this involves estate law planning and inheritance for their children and other heirs. The United States government is poised to make an update to estate planning once again. Before individuals pass away, they need to have a firm plan in place.
One of the most important factors when it comes to estate law planning has to do with the Individual Retirement Account (IRA). There are several categories of IRAs. The most common ones are the regular IRA and Roth IRA, which differ on when tax deductions are claimed on these retirement accounts. With a regular IRA, the deductions are claimed when money is deposited into the account. With a Roth IRA, the deductions are claimed when the money is withdrawn. There is a third type of IRA called a SEP IRA which is meant for people who are self-employed.
One of the new rules with regard to IRAs may impact something known as the stretch IRA. This allowed heirs to inherit an IRA from someone and take the required minimum yearly distributions. For example, if a child inherited an IRA, he or she could get a birthday present every year even as the IRA kept growing. Only that minimum distribution would be taxed.
If this new rule going into effect, the child would have to empty the entire account in only ten years. This would lead to a massive tax payment. This highlights the importance of working with someone who has experience in estate law. Families have worked hard to provide this money to their children and heirs. It is important that they see as much of it as possible.
Estate law planning is a tremendous issue for couples who go through a divorce as well. According to Langer & Langer, there are numerous important issues to discuss, “such as disposition of property, child support, child custody, and parenting time” which might impact the future of an estate and its potential heirs. All of this should be discussed with a professional as well.
According to some estate law professionals, some families may lose as much as 50 percent of their inheritance. It is important to remember that the money they are passing down to their heirs was taxed either as income or capital gains when it was first earned. Many estate law professionals are comparing this tax to double taxation. Some even call it the death tax. Remember that many states have their own estate taxes as well.
This issue surrounding the prospect of IRAs is only one of the many issues that might arise when it comes to estate law planning. As rules and regulations continue to change, it is important for families to stay updated on the latest developments.