text: Many people don’t realize that IRAs can be real planning time bombs. Most people take the minimum distribution, but that can pose a problem for their children, who will have to take the money out at higher tax bracket. In planning, an IRA can also cause problems when trying to obtain eligibility for benefits. With a good asset preservation plan, your IRA can be protected, without causing problems.
  Iras Can Be Planning Time Bombs
  Hi, I’m Wes Coulson and this is your Elder Law Minute. I’ll bet you didn’t realize this, but an IRA can be a real planning time bomb. What do I mean by that? Two things – first of all, I think people make a mistake generally in taking IRA distributions by only taking the minimum. The idea of IRAs is to defer taxes from when you’re working and in a higher tax bracket, to when you’re retired and in a lower tax bracket. By only taking the required minimum distributions, in a lot of cases people are deferring to their kids, who are going to need to take the money out again in a higher tax bracket because they’re still working.
  The other big problem is when we’re trying to get somebody eligible for benefits. Say you’ve got a $150,000 IRA, and we need to get it out of your name to qualify you for VA benefits or Medicaid. Well, if we have to withdraw that whole $150,000 in one year to do that, that means you’ve got an extra $150,000 in taxable income that year. And you’re going to pay a whole lot of income tax on that. You don’t want to do that. IRAs are something that need to be planned for as part of a good elder law and asset preservation plan. Thanks!
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