Here is an example of how we have helped our clients with their financial needs.
Roger’s Story
Roger was a small business owner who had led an adventurous life. When I first started working with Roger, he still actively worked in his business. His personal situation was not uncommon – he had two adult children from a previous marriage, but no children with his present wife. Even though Roger seemed to have clear intentions of how he wanted to divide his estate, I could not convince him to document those intentions as clearly as he should have. Specifically, Roger’s largest investment account was an Individual Retirement Account (IRA).
Even though most assets are transferred to heirs by the instructions provided in a will, an IRA has designated beneficiaries. The beneficiary designation trumps one’s Will – who is named in the beneficiary form will inherit the assets – even if the Will says something different should happen. Technically, Roger did name his IRA beneficiaries in line with the wishes of his will by naming his Estate as the beneficiary. However, in the long run, the most tax-efficient way to inherit an IRA is to name a “live person” as the beneficiary. This can also be accomplished with a properly designed trust. When a “live person” is a beneficiary, heirs can stretch distributions from the IRA throughout their life, giving the asset more time to grow for their own retirement. This also diminishes the taxes paid on the distributions each year.
In the case of Roger, he named his Estate as the beneficiary of his IRA. Since the Estate is not a live person, when Roger died, the assets in his IRA had to be completely distributed within five years, pushing all of the taxes into those years, while losing the opportunity to let those funds grow longer. I had many discussions with Roger about changing his beneficiary designation, but he refused to make that change, and his heirs paid the price.
Read more client stories to learn about how we can help.
At Summit Financial Partners, we believe strongly in personalized service that our clients can trust. Our clients’ financial success is important to who we are.
Whether you are needing help with pre-planning, organizing, and simplifying assets, managing an estate after the loss of a loved one, or diversifying your financial assets, we are here to help you.
Contact us today to find out how we can help you.
