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Author: FoolYap Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 59875  
Subject: Inheriting a 401K Date: 2/8/2007 9:48 AM
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DW and I have a long commute, and use it to yak about all kinds of things.

This morning at one point we were talking about investing, and tax-deferred accounts, and I wondered out loud: What happens to a 401K account when you die? Does the beneficiary (in our case, each other) have to take the money out (at which point it presumably becomes taxable), or can they leave it in the plan, or roll it into their own 401K?

According to this site, it depends, but here's the part that seems to answer our (DW and mine) particular concerns:

http://www.401khelpcenter.com/mpower/feature_2beneficiary.html

The Most Likely Scenario: A Lump Sum Distribution

The most likely scenario is that you will need to take the money out of the account in one fell swoop - a lump sum distribution. "Most plans will decide automatically to kick out the money," says Cindy McCabe, Senior Manager in Employee Benefits Tax Services at Deloitte and Touche in San Francisco. "They do this for administrative reasons," so they don't have to use resources to keep track of the account of an employee who is no longer there.

The lump sum you receive will be subject to local, state and federal income tax. However, you will not have to pay the 10% early withdrawal tax even if you and/or the deceased person are under 59 ½ (the age at which account holders are allowed to start withdrawing money from their accounts without a penalty).

If you are the spouse, you are allowed to roll the money over into an IRA. This way, you can avoid paying taxes until you make withdrawals from your IRA. You should consider a direct rollover - asking the plan sponsor (employer) to transfer the money directly to the financial institution that houses your IRA. If you receive the check yourself, things become more complicated - the employer will have to withhold 20% for the IRS, and you will have to remember to deposit the check in your IRA within 60 days, otherwise the whole amount will be taxed.

If the plan contains company stock, you should check with a tax professional on possible strategies for reducing taxes when cashing it out.


So, sounds like as far as a spouse is concerned, the rules for an inherited 401K are much like the rules for leaving an employer and wanting (or needing) to exit the employer's plan.

Yet another reason to be in favor of gay marriage, so that no one should be forced to pay taxes unfairly on an inherited 401K. </RELE social comment>

--FY
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Author: vickifool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1361 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 10:50 AM
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Yet another reason to be in favor of gay marriage, so that no one should be forced to pay taxes unfairly on an inherited 401K. </RELE social comment>

--FY


This is a really good point. Partners ought to be able to support each other.

Vickifool

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Author: ChilkatSally Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1362 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 10:52 AM
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https://flagship.vanguard.com/VGApp/hnw/accounttypes/retirement/ATSIRAInheritNonspouseBenContent.jsp

Vanguard has some information on this also.

I thought I read somewhere that there have been fairly recent changes to the rules regarding inherited IRA's. I was focusing on a child who inherits an IRA, which would be my case.

The Vanguard information indicates that a child would still have to take the RMD's (required Minimum Distributions) .

I thought I read where they wouldn't have to take those RMD's with the recent tax changes.





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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1371 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 11:34 AM
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I thought I read somewhere that there have been fairly recent changes to the rules regarding inherited IRA's. I was focusing on a child who inherits an IRA, which would be my case.

The Vanguard information indicates that a child would still have to take the RMD's (required Minimum Distributions) .

I thought I read where they wouldn't have to take those RMD's with the recent tax changes.


Your resident gay moderate tax guru to the rescue.

Nothing has changed regarding IRAs. For a long time spousal beneficiaries can treat the decedent's IRA as their own. Non-spousal beneficiaries must begin RMD's based on the beneficiary's life expectancy.

What has changed, effective 1/1/2007, is that a non-spousal beneficiary of a 401(k) can roll it into an inherited IRA. Although the beneficiary must take RMD's, they can now be stretched over the beneficiary's life the same as inherited IRAs.

This got a lot of play as a boon to same-sex couples when it was enacted. It's still not the latitude available to a legal spouse, but it's better than it was.

This discussion brings to mind one of the many horrifying stories of 9/11. A Lesbian civilian employee at the Pentagon was killed. She was survived by her partner of many years and various family members. Since she had never bothered to name her partner as her beneficiary, her 401(k) went to the family.

Couples of any orientation who are not legally married need to make sure all their papers are in order.

Phil

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1372 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 11:46 AM
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The Vanguard information indicates that a child would still have to take the RMD's (required Minimum Distributions) .

I thought I read where they wouldn't have to take those RMD's with the recent tax changes.


no. pretty sure no.

i just went through that .. spent about a week with IRS booklet 509 (or something ..i can find the link if you need it.)

..it said that recent changes made things better, but didn't say how.

as i understand it
child-inherited IRA where parent was over 70.5[*]

has three options: withdraw everything (tax, no penalty);
withdraw everything within five years (tax, no penalty);
withdraw on a schedule using child's life-expectancy ....

penalties are pretty severe if you mess up.

i'm on the 5-yr plan with mom's IRA (trying to maximize growth & minimize tax); my sister went with the 0-yr plan (minimize paperwork)

-jp


[*] (different rules for spouse-inherited, non-spouse/non-child, non-person inherited;
different rules for parent under 70.5, under 59.5 , child over/under 59.5 ... )



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Author: mapletree7 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1390 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 1:46 PM
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A Lesbian civilian employee at the Pentagon was killed. She was survived by her partner of many years and various family members. Since she had never bothered to name her partner as her beneficiary, her 401(k) went to the family.

Couples of any orientation who are not legally married need to make sure all their papers are in order.


What horrifies me about these stories is the implications about the character of the family members who inherit.

What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1393 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 1:50 PM
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What horrifies me about these stories is the implications about the character of the family members who inherit.

What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?



I don't think the law makes it all that simple for the beneficiary to just say "let so-and-so have it instead." But I could be wrong.

AM

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1394 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 1:52 PM
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What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?

Couple the fact that money can do strange things to people with the fact that there could be all sorts of family issues that were never resolved and now, because of an unanticipated death, never will be resolved, and you have the unscripted script that would make soap opera writers green with envy.

Easy solution.

1. Keep your papers in order.

2. Observe Mr. Marti's Rule of 30. If you haven't gotten over family problems by the age of 30, get into therapy and listen!

Phil

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Author: joseph714 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1395 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 1:58 PM
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2. Observe Mr. Marti's Rule of 30. If you haven't gotten over family problems by the age of 30, get into therapy and listen!
-------------

I most certainly can relate to this notion.

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Author: tenworlds Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1396 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 2:03 PM
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What horrifies me about these stories is the implications about the character of the family members who inherit.

What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?

-----

Republican?


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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1398 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 2:14 PM
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I don't think the law makes it all that simple for the beneficiary to just say "let so-and-so have it instead." But I could be wrong.

You're not. Beneficiaries can disclaim, but they can't direct who then gets it. They can certainly give it away, but they still pay the income tax and may expose themselves to gift tax.

Phil

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1401 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 2:19 PM
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2. Observe Mr. Marti's Rule of 30. If you haven't gotten over family problems by the age of 30, get into therapy and listen!

Phil





Sometimes family problems are simply not curable.

AM

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1402 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 2:21 PM
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I don't think the law makes it all that simple for the beneficiary to just say "let so-and-so have it instead." But I could be wrong.

You're not. Beneficiaries can disclaim, but they can't direct who then gets it. They can certainly give it away, but they still pay the income tax and may expose themselves to gift tax.

Phil




That's what I thought.

AM

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Author: GusSmed Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1406 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 2:40 PM
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What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?

I think we've seen plenty of examples of people like that on the Fool. Not naming any names, since that would be incivil. :)

- Gus


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Author: tootru Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1408 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 2:49 PM
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MP7: What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?

Gus: I think we've seen plenty of examples of people like that on the Fool. Not naming any names, since that would be incivil. :)

- Gus


When my gramps died he left a small inheritance for my brother and me in a trust.

There was also a CD that was about 25% of gramps' estate that he hadn't put in the trust.

I had some confusing comments from my grandfather about that CD. I was the sole beneficiary and he said something about "That money is yours." prior to his death. I still don't know if he meant "yours" collectively or "yours" as in just for me. I can think of arguments for both sides and I know my gramps was not pleased with my brothers' spending and LAHM habits.

However, when the time came - though the whole amount of the CD would have come in handy - I distributed the trust to off-set the amount I had received from the CD; both of us got equal amounts (to the penny) from my gramps.

It just felt right, no matter what the letter of the law said I could do.

I'm sure in the instance of the woman who died at the pentagon, there would've been a way to set up disbursements to the grieving partner in such a way as to honor what had likely been the intent of the deceased.

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Author: joseph714 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1409 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 2:50 PM
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Sometimes family problems are simply not curable.

AM
------------

Again, I can most certainly relate to that.

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1414 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 3:53 PM
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Money does stange things to folks, same for greed. Both transcend liberal or conservative orientation.

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1420 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 4:23 PM
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What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?


about 87% of modern Americans ...

Mom had an airtight trust splitting everything 50-50 (sort of) between me and sis.

we had totally amicable time dividing things.... we are constantly hearing horror stories that begin, "You are SO LUCKY your brother/sister was reasonable..."

....my current favorite, woman wanted her children to share equally, but appointed #2 son executor ... he took EVERYTHING in executor fees.

it's a little amazing what people will do for a nice pot of money.


=

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1421 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 4:26 PM
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2. Observe Mr. Marti's Rule of 30. If you haven't gotten over family problems by the age of 30, get into therapy and listen!

Phil


not an "easy" thing Dr.Phil .... most over 30 with family problems are CERTAIN it's THE OTHER GUY's problem


.. a good idea, just not an easy one.


=

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1422 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 4:38 PM
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I'm sure in the instance of the woman who died at the pentagon, there would've been a way to set up disbursements to the grieving partner in such a way as to honor what had likely been the intent of the deceased.

could have done.

but as ugly as people are ,in general ....much uglier when money's involved and still yet astoundingly uglier when 'that' is involved.

..... had a friend who lost his lover/partner to AIDs (early days) ... their papers were a mess (he shoulda known better ,working with lawyers) .. not just no will ... they bought things together and put them in only one name (like the car)

... he tried to splain this to the parents ... "tough **** [rude name for gay person]"

they kind of hated their son because he was gay, hated the entire Universe for the way he died. Decided to, best they could, take it all out on Jim.


=

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1428 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 5:46 PM
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Sometimes family problems are simply not curable.

Note that I didn't say "cured."

My point is that the only thing one can control in such situations is one's own reactions. I have a friend who's 57 and constantly complains about his father, who's been dead 10 years. It's beyond me how hanging onto this is making my friend's life better. Yeah, the old man was an SOB. But at this stage of the game, if it ruins your life it's your fault, not his.

None of this will stop your legal heirs from circling like vultures when you're gone. It will, however, get you past your anxiety about the family by making sure that your legal papers will be sufficient to send them back to their nests hungry.

Phil

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Author: joseph714 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1430 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 5:58 PM
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I have a friend who's 57 and constantly complains about his father, who's been dead 10 years.
--------------------

In treatment, I have a certain method in which I work with the individual to "get complete" with the difficult relative in real time, while they are still alive. It is way way hard to resolve much after they are out of the picture.

After some work, we often will then work with the relative in a group of 3 if it feels productive to do so.

I myself came up with this in my own life having gotten complete with my mom & dad along time before they died, seeing them as people rather than the dynamic of parent child.

After all they are people with so many of the very same desires & unfulfilled wishes in life, & given half a chance, can & do become our "friends" later in their lives when that then becomes a pretty good approach to aging & retaining our humor under tough decisions to be made.

This getting complete with our childhood business seems to have worked quite well with the people who have come for help.

We all though, get the wonderfull chance to find what works best for ourselves.

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1432 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 6:13 PM
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<<What kind of person would shrug and say 'Sorry, but it's mine....' to the grieving partner? What kind of soulless, selfish, dead-inside kind of person would you have to be to keep that money?
>>


It belongs to the person to whom it was given. In the case of a will, such decisions are usually made with the advice of an attorney, in writing and are winessed and notarized. If someone changes their mind, they should change their will.

It's a pretty elementary idea in law, I'd imagine.




Seattle Pioneer

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1434 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 6:25 PM
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None of this will stop your legal heirs from circling like vultures when you're gone. It will, however, get you past your anxiety about the family by making sure that your legal papers will be sufficient to send them back to their nests hungry.

Phil




Eh. You can stop 'em dead in their tracks with a "transfer on death" setup with your mutual fund company. I've already done this. :)
It doesn't go through probate -- it goes directly to the person or persons or organization you specify. Relatives can just go fish.

AM

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1437 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 6:29 PM
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<<You're not. Beneficiaries can disclaim, but they can't direct who then gets it. They can certainly give it away, but they still pay the income tax and may expose themselves to gift tax.

Phil
>>


You don't pay income taxes on gifts you receive. Gift tax issues might well apply if you gave away substantial property, though.




Seattle Pioneer

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Author: ogrecat Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1461 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 9:25 PM
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Mom had an airtight trust splitting everything 50-50 (sort of) between me and sis.

we had totally amicable time dividing things.... we are constantly hearing horror stories that begin, "You are SO LUCKY your brother/sister was reasonable..."

....my current favorite, woman wanted her children to share equally, but appointed #2 son executor ... he took EVERYTHING in executor fees.

it's a little amazing what people will do for a nice pot of money.


"Say not that you know another entirely, until you have divided an inheritance with him."
-Johann Kasper Lavater

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1473 of 59875
Subject: Re: Inheriting a 401K Date: 2/8/2007 11:18 PM
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Eh. You can stop 'em dead in their tracks with a "transfer on death" setup with your mutual fund company. I've already done this. :)
It doesn't go through probate -- it goes directly to the person or persons or organization you specify. Relatives can just go fish.


Good advice. I have TOD (to my wife) on almost all my accounts to avoid probate without expensive attorneys fees for trusts and the like. It isn't very good estate planning, but still much better than nothing.


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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1474 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 12:48 AM
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It isn't very good estate planning, but still much better than nothing.




Why isn't it?

AM

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1476 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 1:29 AM
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<<It isn't very good estate planning, but still much better than nothing.>>

Why isn't it?


I think because it [alone] doesn't allow you to make use of the personal estate tax exemption and then make use of the surviving spouses estate tax exemption later. A few months ago, there was a discussion with 2gifts about it on [I think] the LBYM board. 2gifts also pointed out that estate planning includes a lot more than just retitling financial accounts.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1477 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 1:46 AM
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markr33 writes,

<<It isn't very good estate planning, but still much better than nothing.>>

Why isn't it?>>>

I think because it [alone] doesn't allow you to make use of the personal estate tax exemption and then make use of the surviving spouses estate tax exemption later.>>>


As long as your estate is less than $2 million, it doesn't matter.

intercst

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1484 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 8:49 AM
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As long as your estate is less than $2 million, it doesn't matter.

Doesn't it also depend on what year you choose to die in? :-)


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Author: cattleman22 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1486 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 8:58 AM
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{{I have a friend who's 57 and constantly complains about his father, who's been dead 10 years. It's beyond me how hanging onto this is making my friend's life better. Yeah, the old man was an SOB. But at this stage of the game, if it ruins your life it's your fault, not his}}


I have stopped being surprised at how some people can never forgive. They keep grudges forever, with the anger constantly simmering. That must be a miserable existance. While forgiveness is sometimes seen as a sympathetic or empathetic action, I think it is actually selfish in a good way. I forgive people not just because of the person I am forgiving, but for my own well being and happiness.


c

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Author: cattleman22 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1488 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 9:09 AM
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{{As long as your estate is less than $2 million, it doesn't matter.}}

The number changes every year. In 2010, there will be no estate tax. In 2011, the number will to below $2 million.


c

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1495 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 10:40 AM
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I think because it [alone] doesn't allow you to make use of the personal estate tax exemption and then make use of the surviving spouses estate tax exemption later. A few months ago, there was a discussion with 2gifts about it on [I think] the LBYM board. 2gifts also pointed out that estate planning includes a lot more than just retitling financial accounts.




I guess I don't get it.
If I die, my husband will automatically get my money.
If he dies, I will automatically get his money.
When the last one of us dies, we will be dead and won't be in any position to care about the money.

Where's the problem?

AM

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1496 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 10:41 AM
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As long as your estate is less than $2 million, it doesn't matter.

intercst



I don't see how it matters in any event -- but we do plan to spend our money on our retirement. So, if we do it right, there won't BE anything left. :)

AM

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1614 of 59875
Subject: Re: Inheriting a 401K Date: 2/9/2007 6:45 PM
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I guess I don't get it.
If I die, my husband will automatically get my money.
If he dies, I will automatically get his money.
When the last one of us dies, we will be dead and won't be in any position to care about the money.

Where's the problem?


If you have no other heirs such as children, and you're happy with the intestate laws of your state and are sure that they mean that your DH does, in fact, get everything, then that's fine. The OP, on the other hand, has a few children that he and his DW need to think about, so dying intestate could be a disaster for him.

In MA, for instance, if a spouse dies without a will and leaves surviving children, then the surviving spouse gets 1/3 of the estate, and the children get the other 2/3. Worse, the surviving spouse has to go back to probate court every year until the youngest child has reached the age of majority to prove that they have spent the child's inheritance 'properly' as determined by the court. I've seen this one in action, and it is not pretty.

By leaving all the accounts as POD to the spouse, then one of the lifetime exemptions is forfeited. You may not care about paying the extra taxes that this will entail, but most folks do.

Then there's the case where you and your DH die in the same accident. You may care that if he outlives you by 1 minute, then the intestate laws may end up leaving all your estate to some relative you never heard of or never cared for.

For people with children, as the OP is and as I am, estate planning, which more than a will, is something that should be taken very seriously and done consciously.

It is simply not something I care to leave to the government to decide.

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