You would expect that distributing money from your IRA would not be that difficult but IRS has managed to make IRA distribution issues quite complex. There are several issues:
How to Minimize IRA taxes
It's possible to pay a 70%, even 80% IRA tax when these four taxes are combined and levid on your IRA distribution to heirs: federal income tax, state income tax, federal estate tax, state inheritance tax. But with planning ahead of time, these taxes can be reduced, even eliminated. Our article addresses the properly planning to reduce IRA distribution taxes:
IRA Taxes - How can the rate be 70%+??
IRA Taxes - How do the States tax IRAs?
IRA Taxes - Reducing the tax bracket on withdrawals
IRA beneficiaries --who to select (not as simple as the wife and kids)
If you leave your IRA to your spouse, will this create an estate tax problem for your spouse? If so and you leave your IRA to the kids, what if your spouse needs some of that money? Is there a way to apply your IRA toward your estate exemption? If you leave your IRA to your kids, will it be exposed to their creditors and potential alienated spouse? What is the benefit of using a trust or IRA asset will? IRA distributions issues are complex but hopefully we have simple answers in these article:
Selecting Your IRA Beneficiary
Why Name a Trust as IRA Beneficary
IRA Distributions and Early Retirement
With a weak economy and some being forced to retire early, there's a need to tap into IRA accounts and take IRA distributions prior to age 59. IRA distributions prior to age 59½ incur and early withdrawal penalty. Fortunately, IRS has created an allowance for these early IRA distributions called "rule 72t" and the following article provides an example.
Rule 72t IRA Distributions
IRA Distributions Problems
Problems occur such as people who forget to name an IRA beneficiary or foolishly name their estate. Or those who desire to leave funds to their heirs and charities and the special steps that must be taken. Another IRA distribution issue occurs when people forget to take their required minimum IRA distribution. These topics are addressed in these articles.
Your Estate as IRA Beneficiary
Oops--I forgt to take my IRA distribution
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My dad died May of 2011. My mother is the beneficiary of his IRA. What happens if my mom wants to close out his IRA and put the funds in her saving account? Will she get a penalty even if it is a death distribution?
She can do that. No penalty, just income taxes. better if she just takes over that IRA in her name and then no income tax right now.