Qualified Retirement Accounts like IRAs and 401ks hold a unique place in the Louisiana Estate Planning world. While IRAs and 401ks form part of your estate for tax purposes, you will or trust does not cover these accounts. Instead, beneficiary designations govern their distribution. After the account holder dies, the beneficiaries simply submit a death certificate and claim forms. Upon approval, the account rolls over to the beneficiaries. Because the deceased account owner never paid income tax on the funds in the retirement account, the beneficiaries are responsible for payment of income taxes on the inherited account. Typically, a beneficiary gets ten years to draw dawn and pay income tax on their inherited retirement account.
Sometimes, when beneficiaries carry substantial wealth or receive high taxable income, refusing retirement accounts is a sensible strategy. Disclaiming an IRA or 401k lets beneficiaries avoid additional taxable income and the account remains outside of their taxable estate. This disclaimer strategy can result in significant tax savings when done right. The biggest key in getting it right — the timing! A valid disclaimer of a retirement account in Louisiana must be executed within nine months of the account holder’s death.
If you are an IRA beneficiary who is unsure how the taxes will impact your family, we can help! Just call Legacy Law Center at (504) 274-1980 in Metairie, New Orleans, and surrounding areas or call (985) 246-3020 in Mandeville, Covington, Slidell, Houma , and Thibodaux.