Avoid Probate with an Inherited IRA

Self-directed IRAs accrue tax-advantaged or tax-free earnings. They can also be passed down to beneficiaries so that the fruits of your labor aren’t lost. Inherited IRAs leave your beneficiaries money and help them avoid the hassle and expenses of transferring the money through probate. Most trust accounts require probate upon the account owner’s death for the beneficiary to access the account’s assets. Probates can be both time-consuming and costly for surviving loved ones, but beneficiaries of an Inherited IRA can avoid the probate process altogether. Any tax-advantaged plan can feature beneficiaries as designated by the account holder. These accounts would become Inherited IRAs (or Inherited 401(k)s, HSAs, etc.) when the original account holders pass away.

Need to assign or update your account beneficiaries? Log in to the Client Portal and see further instructions below.

Rules of an Inherited IRA

Inherited accounts will continue to bear the pre-tax or post-tax benefits of the account. However, new rules may apply to the new account holders. Non-spouse Inherited IRA holders must fully distribute the account over the course of the following ten years. This can occur incrementally over that time or all at once. They are also prohibited from making contributions to, transferring, or rolling inherited holdings unless they are consolidated with holdings from another account that was inherited from the same original account holder.

Spouse Inherited IRA holders, on the other hand, may treat their inherited accounts as their own without any of the aforementioned restrictions or distribution obligations.

In either case, an Inherited IRA can still invest in a wide array of assets, not just bank or brokerage securities. Assets like real estate, precious metals, private equity, and private loans can all continue to earn for an account even after it’s inherited. The inheriting beneficiary can decide how to manage these assets for themselves.

Current New Direction Trust Company account holders can update their beneficiaries through their client portals by:

  • Logging into the Client Portal.
  • Clicking “Profile” at the top of the page.
  • Finding “Beneficiary Designation” and clicking the “Update” button.

Give us a call at 877-742-1270 if you have any questions or concerns.

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