Does my Roth IRA go through probate?  Many people don’t understand which of their assets go through the probate process.  It’s important to fully understand how your assets are transferred so that you’re able to make things happen the way you want them to happen. Take a look at the following information, to better understand what happens with your retirement accounts after your death.  If you have any questions, or if you’d like to plan for probate avoidance, contact an estate planning attorney.

Individually Owned Assets Go Through Probate

Individually owned assets go through probate; this is true.  However, perhaps, we should specificy that individually owned assets, which do NOT have a beneficiary designation, go through probate.

Individually owned assets are assets that you own in your own name (and your name alone.)  For example, if you’re single, your home and your bank account may be in your individual name.

Beneficiary Designation Assets aka Contract Assets

Assets that have a beneficiary designation are also known as “contract assets.”  They do NOT go through probate, even though they are typically owned in an individual name.  The assets are distributed pursuant to the terms of the contract (i.e. beneficiary designation form.)

Examples of beneficiary designation assets are retirement accounts, such as your Roth IRA, and life insurance policies.

Your Roth IRA Does Not Go Through Probate

Your Roth IRA does not go through probate because it has a beneficiary designation.  No retirement assets go through probate so long as you have named a designated beneficiary.

Probate Avoidance Caveat

Beneficiary designation assets avoid probate so long as an individual or trust is named as the beneficiary.  If you name your estate as the beneficiary of these assets, probate is guaranteed.  In addition, if you prfer to avoid probate you need to make sure the rest of your estate avoid’s probate too.  In Iowa, once a probate is triggered by some assets Schedule I to the probate invnentory includes the values of IRA’s, annuities. Roth and other employer sponsored retirement accounts that could have avoided probate. Schedule E will include joint tenancy assets too.

This reult will mean the associated court costs, executor and attorneys fess will be calculated including these Scheduled items even if  the court does not control those assets.  Probate avoidance is very difficult to do without professional help.

Where to Get Help Avoiding Probate

If you have any questions, or if you’d like to plan for probate avoidance, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

People really dislike three things: death, taxes and change.

As an attorney I often help clients with their planning to deal with these first two taxes and death. I have found however that often to accomplish these you also have to realize you may need to accept change.

I recently took out a book I had read a few years ago. It was a book published by Spencer Johnson M.D. originally in 1998 entitled, “Who Moved My Cheese?” I thought of it because I was trying to determined how I could make a New Year’s resolution embracing change in my life. The book is about how to deal with change in your work and in your life. I recommend it to anyone.

Simply, the book tells a story of two mice named Sniff and Scurry who cannot figure out how to handle change in their life. Cheese is a metaphor for what you want in your life, whether it is a good job, loving relationship, money, possession, health or spiritual peace of mind.

The characters face unexpected change. Eventually, one deals with it successfully and they come to see the “handwriting” on the wall. How we deal with change in our lives may even determine how long we live. Some studies have shown that people who resist change have a higher incidence of certian illness. The “handwriting on the wall” that is discussed in the book is condensed in the following points we should all accept:

Change happens.

Anticipate change.

Monitor change.

Adapt to change quickly.

Be ready to quickly change again and again.

I have decided one of my personal New Year’s resolutions regarding change is that I will be more open to change. I know it will help keep me fresh, aware, alive, open and happier. It will also help to keep me out of a rut. I strongly believe that these are thoughts we could all benefit from adopting.

From now on in our lives we should celebrate uncertainty and embrace change!

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1. Fear of the Future

The cycle begins with a sense of uncertainty about the future, characterized by questions like: “Will there be enough money to maintain my standard of living? How much do I need to save? How do I know what is the best investment?” The media and advertisers prey upon this fear of the future in an effort to sell products.

2. Forecast and Predict

Because of this fear of the future, investors have a strong desire to comprehend and predict future events. If someone could tell what is going to happen with inflation, long-term interest rates, share prices, overseas markets, then there would be less to fear about the future from an investment perspective. Along these lines, investors are frequently convinced that someone has the information, power and insight to forecast the future.

3. Track Record Investing

The primary method investors employ to convince themselves that the future can be foretold is through track record investing. This means they look for stock managers who have performed better than the market in the past with the hope that they will continue to have superior performance in the future.

4. Information Overload

In the past, gathering information was the best way to guide prudent investment decisions. However, the current Information Age has created access to so much information that it is easy to become overloaded. Investors feel compelled to understand all of the information: the Internet, books, newpapers, magazines, TV talk shows, advertisements, friends’ experiences, etc. Indeed, instead of reducing fears, this deluge of information often intensifies doubts about investing.

5. Emotion-Based Decisions

As investors, we never overcome our own humanity. Even though most investors prefer to think that they make investment decisions based upon logic; typically emotions, such as trust, loyalty, hope, greed and fear drive our investment decisions.

6. Breaking the Rules

There are three commonly accepted rules of investing: 1) Own equities 2) Diversify and 3) Rebalance. And, the golden rule of investing is: Buy when prices are low and sell when prices are high. It sounds simple. However, when investors make decisions based on emotions, they wind up breaking these seemingly simple rules, thereby sabotaging their portfolios.

7. Performance Losses

Performance loss means investors fail to capture the returns they expected. Unfortunately, because investors so frequently break the golden rule of investing, they do not receive the rate of return they expected. Investor performance does not equal investment performance. When this effect is compounded over a period of years, an investor’s potential for reaching financial goals is significantly decreased. Such loss creates additional frustrations and fears about the future, once again initiating the cycle.

THE RESULT: Not Enough Money and No Peace of Mind

The end result of the Investors’ Dilemma is not having enough money combined with worry, frustration and anxiety about the inability to accomplish meaningful life goals.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

I meet with clients every week who have been devastated by losses, frustrated by lack of returns and feel anxious by the lack of knowledge they have about their investments. I often tell my clients “what good is a great estate plan if you are financially bleeding to death while you are alive?”

I tell them that they are trapped in the Investors’ Dilemma and they need to get basic financial education to protect themselves.

I recently finished one of the best books I have read in long time on investing. I would tell anyone that has money to invest for their estate or retirement planning to add this book to your reading list. You will not regret it.

It was co-authored by Gordon Murray and Daniel Goldie. In less than 100 pages, it clearly tells everyday investors nearly everything they need to know about investing in the stock and bond markets to beat 95% of Wall Street’s best money managers.

Murray had a 25-year career on Wall Street that included stints at Lehman Brothers, Goldman Sachs and Credit Suisse First Boston. His career, like those of many in the investment community, was built around beating the markets–which many claim to do but few pull off.

Murray retired in 2001. He later met Daniel Goldie, a former professional tennis player and financial adviser, who taught him the virtues of passive investments.

While active investors try to beat the markets, passive investors are content to tie them. The irony, however, is that passive investors over time do better than the vast majority of active investors, due in large part to the excessive fees and taxes faced by people who try in vain to beat the market.

As The New York Times reported in a great article last month called “A Dying Banker’s Last Instructions,” (NY Times article) , Murray was diagnosed with terminal brain cancer in 2008. He has ceased treatment and doesn’t expect to live past his 61st birthday in March of 2011.

Murray decided to use his last days on earth to write about his new investment epiphany. His friend Goldie co-authored the concise paperback “The Investment Answer,” which was published in August, 2010.

It is easy to read and anyone who doe not think they understand investing should read this book. It will be out in hardcover later in January 2011

Link to The Investment Answer

Leave me a comment after you read the book.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

On December 17, 2010, the President signed into law The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This bill restores the IRA Charitable Rollover for 2010 and permits its use in all of 2011. The act is retroactive to January 1, 2010, so donors who previously made 2010 IRA rollovers will qualify.

The principal rules for direct transfers from an IRA to a qualified public charity are
1. The IRA owner must be 70½ or older

2. The transfer is for no more than $100,000 each year (A 2010 transfer qualifies for the required minimum distribution)

3. It must be to a public charity either outright or for a specific purpose, but may not be to a donor advised fund or supporting organization

4. The transfer is made directly from a custodian or trustee to the charitable organization

A very important potential 2010 benefit exists. Because Congress recognized that it is very late in the year, individuals who choose to make a qualified charitable distribution rollover from their IRA trustee to a charity may make their 2010 charitable gift during 2010 or in January of 2011.

Remember that this distribution is NOT considered a tax deduction.
However, any money transferred to a charity will not be considered taxable income and therefore will not be taxed.

Call us and we can help you with these issues and your IRA and charitable planning.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

A really timeless article that explains why active portfolio managment is a mistake for any investor.

Click here to read active vs. passive investing

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Many times clients ask about a comparison of taxes when they think of retirement and moving to another state. This site is one that I think provides a great explanation of the “total tax burden” that one must consider when you start to consider the retirement process.

Hope it helps you. Link to compare state taxes

We appreciate you following us and value your comments and input. Please provide your thoughts by using the comments section on our blog page.

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Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

A couple great recent articles about Roth IRA planning from the Wall Street Journal. Leave a Roth IRA to Kiddies

Almost as important is the question of whether you should convert to a Roth. Reasons why you should NOT convert to a Roth IRA. Click HERE

P.S. We appreciate you following us and value your comments and input. Please provide your thoughts by using the comments section on our blog page.

You Can Also Find Us Online: Facebook | Twitter | LinkedIn

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

This may be one the biggest fears that anyone has? Can I afford to retire? Will I run out of money? This is seems to be especially prevalent during a difficult economy and volatile investment markets.

In order to find peace of mind in these matters, you have to ask yourself what is your True Purpose for Money. Until you do that with a qualified coach, no amount is ever enough but with a true purpose greater than money any amount is enough. Click for video on the True Purpose for Money.
Hire a coach to help you with this discovery to improve your life. A coach will help you ask the most imortant questions to improve your financial peace of mind. Find a coach.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

The Patient Protection and Affordable Care Act of 2010 (PL 111–148) will bring the most sweeping changes to American health care. The 2010 Healthcare Reconciliation Bill adds a surtax of 3.8% to investment income beginning in 2013.

Many IRA owners could benefit from taking a second look at a possible ROTH conversion. Your team of advisors can help you review your situation to see how it fits. ROTH conversion is not for everyone and your specific circumstances, goals and investment time horizon will impact your decision. Like many legal and financial decisions the answers depends.

Roth conversions from 2010 through 2012 will help many taxpayers reduce their exposure to the new surtax. Within the surtax provisions of the law a “bubble” exists for many taxpayers which will result in a 43.4% effective tax rate on all or a portion of traditional IRA distributions. This tax rate could be avoided on future ROTH distributions, as a result the potential future tax savings of a ROTH conversion before 2013 are enhanced because of the health care surtax.

Some people are not candidates for a ROTH but maybe should consider it. Call to get an appointment with your advisors today to see how this new tax law impacts your estate and retirement planning situation.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.