In Loving Memory April 2023

IN LOVING M EMORY

OBITUARY AND REMEMBRANCE TRIBUTE

JANUARY – MARCH, 2023

LOVING M EMORY IN

OBITUARY & REMEMBRANCE TRIBUTE

During a family’s time of sorrow, we want to reflect on the lives of those who have recently passed. The Gazette offers this special quarterly feature to commemorate and honor those we have lost.

This edition provides a listing of obituaries and memorials placed in The Gazette January 1 through March 31, 2023.

Explaining wills and trusts

It is never too early for adults to think about estate planning, an important part of money management. While it is easy to think of estate planning as just a way to dictate how your assets are allocated after your death, it also can protect people and their money should accidents or injury make them incapable of managing their finances on their own.

Some familiar terms may come up when people begin planning how they hope to transfer their assets. Two more common terms are wills and trusts. Understanding the distinctions between the two can help people as they begin estate planning.

What is a will?

The online financial resource Investopedia notes that wills are legally enforceable documents that dictate how people want their affairs handled and assets allocated in the wake of their deaths.

Wills should include a host of information, including who a person wants to assume guardianship of their minor-aged children should they pass away. This is especially vital information to include in a will, as surviving relatives may have to go to court to contest

custody if parents do not dictate who they want to serve as guardians.

What is a trust?

A trust is a relationship in which another party is given authority to handle a person’s assets for the benefit of that person’s beneficiaries. When making a trust, a person will need to designate someone as a trustee, who will be tasked with distributing assets in accordance with the terms dictated in the trust.

There are many types of trusts and working with an attorney who specializes in estate planning can help people determine which type of trust, if any, is best for them.

Is it better to have a will or trust?

Both wills and trusts can be useful when estate planning. In fact, wills are often used to establish trusts, and many people have both a will and a trust.

Estate planning is an important part of managing one’s finances. A qualified attorney who specializes in estate planning can help people write their wills and, if necessary, establish trusts that can help surviving loved ones.

Ronald Womeldorff October 13, 1951 –December 16, 2022 Romero Family Funeral Home

Samuel Deryl Wood November 16, 1953 –February 19, 2023

Jimmie Zawacki January 30, 2023 Swan Law Funeral Home

Patricia Ziemer March 15, 1947 – February 3, 2023 Shrine of Remembrance

Inheritance rules for traditional and Roth IRAs

BY NINA SEMCZUK, CEPF SMART ASSET

Inheriting an IRA, whether a traditional or Roth account, comes with certain responsibilities. The rules for an inherited IRA depend on the specifics of your situation, as well as the deceased’s age and other circumstances. Unfortunately, you might have to make financial decisions about the account while dealing with your grief. Financial advisors work with beneficiaries to develop the best strategies. Let us look at the government’s rules and the number of potential tax penalties or benefits that can apply to you and the IRA.

What is an inherited IRA?

An inherited IRA is an individual retirement account that gets opened for a beneficiary (this could be a spouse, family member, unrelated person, trust, estate or nonprofit organization) after the original owner dies. Tax rules for beneficiaries are different, depending on whether you are a spouse or non-spouse.

IRAs are tax-advantaged accounts designed for retirement savings. They can hold stocks, mutual funds, bonds and a variety of other financial products. Your money earns interest and grows — tax-free. Until you reach retirement age, you do not pay income tax or capital gains tax on the money in the account.

There are two major types of IRAs: traditional and Roth. With traditional IRAs, you contribute pre-tax earnings

which are considered tax deductible. When you retire and start taking distributions from your IRA, those distributions will be taxed as income. For Roth IRAs, you contribute taxed income (and your contributions are not tax deductible) and when you retire, your withdrawals are tax-free.

As a beneficiary, you can transfer the money from any type of IRA to a new inherited IRA in your name. Note that the SECURE Act changed IRA rules in 2019, and now non-spouse beneficiaries must take money out of the account within 10 years of the owner’s death.

Rules for inheriting a traditional IRA: Spouses

The IRS lists three options for spouses who inherit a traditional IRA. If that is you, the first option is to designate yourself as the account owner. You will put the account under your name (also known as “retitling”). This way, the account is yours to contribute to or withdraw from. Keep in mind, in most circumstances you must be 59 1/2 or older to withdraw from an IRA without penalty.

Your second option is to roll the inherited account — tax-free — into an IRA you already possess. If you have an employer retirement plan, you can roll the inherited IRA into that account, as well. In both situations, you become the owner of the IRA.

The third option is to treat the account as a beneficiary, not as the owner. This could mean withdrawing the money in a lump sum, but that is not your only choice. Treating the account as a beneficiary also means you have the option to transfer the assets to an “inherited IRA” held in your name. This will come with required minimum distributions.

For the first two options, since you are treating the assets as your own, you will have to pay a 10% penalty if you make an early withdrawal before you are 59 1/2 years old. For the third option, you must start withdrawing funds from the account once you reach 72 years of age.

Note that the SECURE Act raised the RMD age from 70 1/2 to 72. However, if you were 70 1/2 by 2019, you still had to take your first RMD by April 1, 2020. The SECURE 2.0 Act, passed at the end of 2022, raised the RMD age to 73.

Rules for inheriting a Roth IRA: Spouses

If you inherit a Roth IRA as a spouse, you can withdraw any or all the account, tax-free, provided the account has existed for at least five years. In this case, you will not be charged the 10% early withdrawal penalty.

If you would rather not take the Roth IRA as a lump sum, you have options. The better option for long-term savings is to transfer the assets to an existing Roth or to open a new Roth

IRA. The account can grow without penalty, due to the lack of required minimum distributions. You can also leave the money in the account to grow indefinitely for the next generation. This is one of the biggest differences between Roth and traditional IRAs.

Rules for inheriting an IRA: Children and other non-spouse beneficiaries

If a parent leaves you an IRA, you are the beneficiary. The IRS calls this situation a non-spouse inheritance. Parent to child is the most common nonspouse situation, but it is not exclusive. As a non-spouse beneficiary, you cannot retitle the IRA in your own name. That benefit is only available for spouses. You can, however, transfer the account into a new account. This is known as an “inherited IRA.”

You could immediately cash out traditional or Roth IRAs through a lump sum distribution. With traditional IRAs, withdrawals are taxable income. However, withdrawals from Roth IRAs (if the account was open for at least five years) are tax-free. The downside of taking all the money out immediately is that you lose the long-term benefits that occur when the money grows within the IRA. However, it is an option if you need funds right away.

If you only want to withdraw some money, but not all, you can do so. You must transfer the account to an

When you place an obituary notice in The Gazette, you may order a special keepsake to remember your loved one. This beautiful handmade plaque is composed of the obituary and the name of our newspaper, along with a beautiful graphic. For additional memorial options, please call 719-636-0101.

Inheritance rules

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“inherited IRA” held in your name. Note that non-spouse beneficiaries who inherit an IRA in 2020 or later now must withdraw all funds within 10 years of the original owner’s death.

Before the 2019 SECURE Act, nonspouse beneficiaries could have used an estate planning strategy (called a “Stretch IRA”) to stretch distributions over their lifetime. So, if you were a 35-year-old beneficiary in 2019, you could have stretched distributions over 48.5 years based on the IRS life expectancy tables.

While the SECURE Act eliminated this stretch option in favor of the 10year payout provision for non-spouse beneficiaries, some beneficiaries could qualify for exceptions. These include minor children, people with disabilities, the chronically sick and others.

Bottom line

Inheriting retirement accounts can be stressful. As it stands, the rules

are complex and not the most userfriendly. You will want to make sure you understand all your options before making any decisions about your inheritance. It is always better to take your time with financial decisions.

Tips for heirs

When you inherit an IRA, there are many rules to follow, depending on your relationship to the account owner. A financial advisor can help you understand what you must do, as well as answer any related questions you might have. Finding a financial advisor does not have to be hard. If you are ready to find an advisor who can help you achieve your financial goals, get started now.

If you are a surviving family member of the decedent, you should learn about Social Security death benefits. You should also review what you might owe in taxes when a family member passes.

“Thank you so much for the memorial plaque of my husband. That was one of the best pictures of him that I found. I already have it hanging on my wall.”