Tricks, traps to be aware of when advisor is creating an Inherited IRA?

[Allen Trent]

Thanks for the trustee information. That is helpful.

In regard to the RMD factor, What I found for an Inherited IRA factor is that it works differently than a normal IRA. You go to the table once for the starting point and then just subtract 1 each following year until the funds are entirely distributed.

you are correct on the subtract by 1. I had forgotten that component. Ironically, that is also how RMD for a person age 70 and older used to work just 15 years ago or so. someone age 70 had to take 1/16 out then it went down by 1 each year ending with the person having to empty the IRA by the time they were 86.

 

[LostDollar]

So I go to broker check with 2 names.

Both come up with over 20 years of experience.

Coincidentally (?) both show the same employer name under broker registration history, 1 for less than 5 years, one for more.

1 is marked as a broker regulated by finra, has 1 state license and is the less than 5 years one under current employer registration history.

1 is marked as both a broker regulated by finra and an investment advisor, has 6 state licenses and is the over 5 year one with the current employer registration history.

What sort of differences in services and fee structures might a person expect from a broker and investment advisor vs a broker?

Would an investment advisor be more likely to be willing to provide some services for me in regard to establishing inherited ira accounts with a financial custodian at an hourly rate and not also leave me fighting with him (the advisor) over whether or not I place assets under his management for an ongoing percentage of assets fee?

 

[Tahoe Ray]

So I go to broker check with 2 names.

Both come up with over 20 years of experience.

Coincidentally (?) both show the same employer name under broker registration history, 1 for less than 5 years, one for more.

1 is marked as a broker regulated by finra, has 1 state license and is the less than 5 years one under current employer registration history.

1 is marked as both a broker regulated by finra and an investment advisor, has 6 state licenses and is the over 5 year one with the current employer registration history.

What sort of differences in services and fee structures might a person expect from a broker and investment advisor vs a broker?

Would an investment advisor be more likely to be willing to provide some services for me in regard to establishing inherited ira accounts with a financial custodian at an hourly rate and not also leave me fighting with him (the advisor) over whether or not I place assets under his management for an ongoing percentage of assets fee?

NAPFA - The National Association of Personal Financial Advisors

If you want hourly/1 time consults go here. Most of them will charge similarly to what an attorney does.

 

[LostDollar]

Ray, thank you for the suggestion.

It does not appear to be useful for me. There are two firms listed for my city. Both appear to be focused on overall wealth management for a client at a percentage of assets fee and a requirement of a minimum of half a million in investable assets. One will definitely NOT provide the kind of help I think I am looking for, for a non-wealth management client, the other probably won't.

 

[Tahoe Ray]

Ray, thank you for the suggestion.

It does not appear to be useful for me. There are two firms listed for my city. Both appear to be focused on overall wealth management for a client at a percentage of assets fee and a requirement of a minimum of half a million in investable assets. One will definitely NOT provide the kind of help I think I am looking for, for a non-wealth management client, the other probably won't.

You don't need to meet someone face to face. For 250-500 bucks you can have all of your questions answered by someone who knows what they're talking about.

Well worth it if you don't want to pay an AUM fee.

You can also google "hourly planners" in your area if you'd like to meet someone 1 on 1.

That's really what you're looking for.

 

[LostDollar]

You don't need to meet someone face to face. For 250-500 bucks you can have all of your questions answered by someone who knows what they're talking about.

Well worth it if you don't want to pay an AUM fee.

You can also google "hourly planners" in your area if you'd like to meet someone 1 on 1.

That's really what you're looking for.

I never could come up with someone that would work on an hourly basis.

The information I needed was some pretty specialized and detailed info about procedures relating to one particular retirement plan custodian. Seeing the details in retrospect, I am not sure how many people I might have spoken to would either have had, or been willing to give me, the information I needed.

Things finally got to the stage where enough privacy restrictions were removed that I was allowed to speak directly with the designated representative of the financial plan custodian-at which point I learned that the decedent trustee's idea that I had to have an inherited ira established, prior to taking any actions with the plan custodian to take ownership of funds, was totally bogus. If I could have learned that single piece of information several months ago, life would have been much easier.

 

[LostDollar]

I'm uploading this first. When I can think up the post I want to go with it, I want to discuss it with allen in relation to some of our previous posts.

(Note, it is a chart that comes from Michael Kitces.)

 

[Allen Trent]

View attachment 5347

I'm uploading this first. When I can think up the post I want to go with it, I want to discuss it with allen in relation to some of our previous posts.

(Note, it is a chart that comes from Michael Kitces.)

great chart. but keep in mind, the items on the left hand related to a trust beneficiary may be allowed by the IRS, but the custodian of the current account may or may not permit a trust look through/see through to see if it is up to IRS standards. some custodians don't want that responsibility, but most do permit the see through.

Also, on the right side of the chart related to a spouse a or non-spouse beneficiary, this chart is merely showing the stretch RMD options, but there are several other death claims options allowed by law or contract. IE: 5 year deferral where the money is left on deposit as a death claim & money can be taken each year, but the account must be emptied by the end of the 5th year. If it is an annuity contract, the beneficiary could elect a payout annuity & this can be a great option for some of the oldest annuities because both the guaranteed payout annuity interest rates & the mortality tables in those payout options are outdated & both in the favor of the consumer.

Lastly, if the beneficiary is a non-person such as an Estate or LLC, charity, some of these death claim settlement options are not available & don't appear on this chart.

Also, a great option for some high income earners who don't need the retirement account they are inheriting, they can disclaim their share & are treated as if they are deceased. So, if per stirpes is listed on the beneficiary designation, disclaiming would mean the person disclaiming share would be offered to that persons children. this then allows the stretch IRA to have even lower RMD with the younger childrens beneficiary life expectancy table on their younger age.

Good stuff, but hard to find an all inclusive, simple to understand chart that can make this easy for the consumer to understand & plan in advance or deal with at the time they have to make choices