Law Office of Amy B. Van Fossen, P.A. - Elder Law

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Talking to adult children about estate planning

Florida parents should talk to their adult children about their estate plan. This can help their children understand the plan and can also help parents make sure they clear up any misunderstandings about the assets. In some case, this can mean significant savings for beneficiaries.

For example, beneficiaries might not understand the tax ramifications of inheriting an IRA. A stretch option allows them to take only the minimum distribution, but some may want to take a lump sum. However, this can lead to paying 40 percent or more of the account in taxes and penalties. Children should also know that they cannot roll over an IRA into their own accounts without incurring a large tax bill. An IRA custodian may be able to administer the inherited IRA and manage the required minimum distribution.

Beneficiaries should also be aware that tax-deferred assets, including annuities, could also lead to a significant tax bill. People should consider having their beneficiaries meet with their financial adviser. This can be done by conference call if everyone cannot be together in person. At minimum, beneficiaries should know who has the relevant financial information and how to contact that person.

Talking about estate planning can be difficult for many people, but it is necessary if a person wants to make sure that assets are distributed to the intended people. Estate planning and talking to loved ones about estate planning is important for other reasons as well. For example, people should be appointed to manage financial and health care decisions if a person becomes incapacitated. The people who are chosen for these roles will be better able to perform them if they know the principal’s wishes.