The Supreme Court’s landmark decision regarding same-sex marriage brings with it many issues that are probably best discussed with a good estate lawyer in the Western Suburbs. Because of the previous inability to legally marry, many of those now looking to walk down the aisle are considerably older than typical newlyweds. This leads to additional considerations regarding a number of topics, not the least of which is Social Security.
Before the Supreme Court decision, only couples living in states where same-sex marriage had been legalized could expect Social Security benefits from/for their spouses. Now, however, there are a number of benefits that are potentially available. For example, if one spouse is or becomes disabled, the other may be entitled to a spousal disability benefit. There is also a lump-sum death benefit of $255 that a surviving spouse may claim. The surviving spouse may also be able to draw the deceased’s benefit if it is greater than his or her own. This can be tricky terrain, with the possibility of suspending or delaying retirement benefits for various reasons, so a Western Suburbs estate lawyer can be a good resource.
Of course, Social Security benefits are contingent upon meeting certain criteria. Fortunately for so many couples, one of the more basic—that of a legal marriage—can now be achieved.
Other Legal Implications of Marriage
The right to marry also brings with it a lot of legal responsibilities. It is, after all, a binding contract between two parties. Financial planning. Estate planning. Legal planning. All that in addition to wedding planning! Fortunately, a smart estate lawyer in the Western Suburbs will be able to offer insight into all of these areas. In many cases, that particular attorney can do a lot of the work for you; and if not, there’s a pretty good chance he or she knows someone who can.
One of the hard-won rights for same-sex couples is the ability to be involved in a spouse’s health care. From being able to visit one another in the hospital to having say over medical decisions, these are some of the most important benefits of marriage. While some of these rights are conferred automatically, estate lawyers all over the country will still encourage any married couple—same sex or not—to create health directives, powers of attorney, healthcare proxies, and more. Being legally married is an excellent step in the right direction, but having the proper documents puts everything into order.
Finally, don’t forget to talk to a Western Suburbs estate lawyer about a prenuptial agreement. No, a prenup isn’t generally seen as romantic, but despite waiting so long for the legalization of same-sex marriage, the unfortunate truth is that some of those unions will end in divorce. This is a typical service offered by an estate lawyer in the Western Suburbs and is one that shouldn’t be overlooked during this exciting time.
Inheriting an IRA can be a financial blessing but you have to be extremely careful about withdrawing the funds. There are a number of mistakes you can make that can result in a missed opportunity for tax-deferred growth, or worse, a huge tax bill.
Luckily, surviving spouses have some leeway. It’s still tricky to transfer from spouse to spouse. But the rules for spouses are different than non-spouses.
If you have more than one child, it may seem logical to name the estate as beneficiary. This is not always a good idea. In this case, your children will be required to take all of the money out of the IRA by the end of the fifth year after your death – missing the opportunity to accumulate interest and enjoy the tax sheltering benefit.
Owners of traditional IRAs must start taking the required minimum distribution (RMD) when they turn 70 ½. Non-spouse beneficiaries must start taking RMDs upon inheriting. This means you can’t leave the entire amount in the account, allowing it to draw interest. The penalty for not taking RMDs on time is steep: A full 50% penalty on the amount that should have been withdrawn for the year!
Unfortunately, non-spouse beneficiaries can’t roll an inherited IRA into their own IRA. A separate account Inherited IRA must be set up and titled so that it includes the decedent’s name, the name of the person inheriting, and an indication of the purpose of the IRA. For example, it might say, “Rhonda Smith (deceased January 7, 2015) IRA for the benefit of Roy Smith.” If the account is split among beneficiaries, the original IRA must be split into separate IRAs and each one must be titled in the same manner.
To avoid this pitfall, name a separate share trust drafted by an experienced estate planning attorney to qualify as a permissible beneficiary of the IRA ( or your children directly if asset protection is not important to you or your children), and not the estate. By doing so, they will have a lot more flexibility. They can take annual distributions based on their own life expectancy which allows them to leave the money in the account and defer taxes.
Roth (not traditional) IRAs can usually be withdrawn tax-free. But, your beneficiaries will be prohibited from depositing them into their own IRAs and they’ll have to pay taxes on the whole amount.
The issues above are just some of the traps you can fall into when inheriting an IRA. When it comes to transferring IRAs, it is critical to seek the advice of a qualified, experienced estate attorney in DuPage County. They can help you decide whether or not to withdraw the funds or set up an Inherited IRA.
If you have questions about how to inherit an IRA or if you want to make sure the beneficiaries on your IRA are set up correctly, give our DuPage County estate planning law firm a call at (630) 908-2752 for assistance.