When his 75-year-old father died, forty-year-old John inherited his father’s $1 million traditional Individual Retirement Account (IRA).  John wasn’t sure what to do with all that money.  So, he contacted the financial institution managing his father’s IRA and asked them to send him a check for the full amount.  He figured that once he got the money, he’d put it in his savings account and give himself a little time to decide what he would ultimately do.  After all, he knew that with his own traditional IRA he could take the money and roll it into another IRA within 60 days without penalty.

But that’s not the way it works with inherited IRAs.  Unfortunately, John didn’t wait to find out the rules.  And so, because he received that lump sum distribution, he lost out on the opportunity to stretch out the growth and tax benefits of that money over years, possibly decades!  Instead, the $1 million was included as income the year he received it, placing him in the highest tax bracket!  With a combined Federal and NJ state marginal income tax rate of 45%, John paid $450,000 in taxes on that $1 million distribution!

So let’s examine this:

-   As noted above, John requested the lump sum payout before he knew what rules applied to his inherited IRA. He should14079779 s 300x225 Inheriting an IRA   Rules for Averting Huge Taxes! not have done this!

-   Under the IRA beneficiary rules, John could not roll over the $1 million to his personal IRA.  However, there’s a strong likelihood that he could have rolled over the $1 million via a direct trustee to trustee transfer into an inherited IRA account.

-   Usually, under the terms of an inherited IRA account, John would have been able to withdraw a minimum amount each year over his expected lifetime (as calculated by a specific formula).  Or, if he preferred fewer distributions (for example, over 10 years), he could have requested that, receiving an annual payout of $100,000 for each of those years.  In either case, that would have left money in the account to appreciate, income tax deferred, for an extended period of time.

-    And, John’s yearly income taxes for the annual withdrawal from this IRA would have been significantly less burdensome than the income taxes on the $1 million he received in a lump sum!

Getting Help:

The rules for inherited IRAs are very complicated.  Depending on the circumstances, different rules may apply.  If the rules are not properly followed, the IRA beneficiary may end up paying higher taxes or penalties along with forfeiting opportunities for future tax-advantaged growth.   Given the potential pitfalls all along the way, it is best to contact an expert, such as an estate attorney or financial advisor, to help insure that you are managing your IRA inheritance in a way that meets your needs and minimizes annual income taxes while optimizing long-term financial growth.

Experienced Estate Planning Attorney, Elga A. Goodman, can help you successfully navigate through the maze of rules and regulations associated with inherited IRAs.  Contact us today at 973-841-5111.

The information contained herein is for informational purposes only and should not be construed as legal or tax advice.  The persons and situation discussed are fictional.  Any resemblance to real persons or to real life examples is purely coincidental.




In our last post, we discussed problems that may arise if a person dies intestate (without leaving a Will).  In this post, we discuss the process for administering and distributing the assets of someone who dies intestate:

What you should know:

1. The Surrogate’s Court (in the county where the deceased resided) has judicial oversight over how the estate is administered.

2. Typically, upon an individual’s death, the surviving spouse, or, if there is no spouse, an adult child or other close relative petitions the Surrogate’s Court to b12565428 s 200x300 Your Father Died Without A Will.  What Happens Next?e appointed administrator for the estate.  When no relative is willing to serve, or none is available, a non-family member may seek the appointment.

Note: If the spouse applies to serve as administrator, the other heirs are not required to give consent.  However, if someone other than the  spouse seeks to serve, then the other heirs must consent by completing “renunciation forms.”   If the heirs cannot agree on who should serve, then the court selects the administrator.

3. The administrator is responsible for collecting and preserving the assets, paying all outstanding bills, federal and state taxes, and funeral expenses, and distributing the remaining assets to the beneficiaries.

Note:  The administrator must post bond for a specified amount of money as determined by the court.  If the administrator fails to successfully fulfill his/her duties, then the bond will be used to offset the resulting financial damages or losses.

4. Because there is no Will, assets that would normally pass through a Will are distributed in accordance with the state’s “intestate succession” laws.  These laws designate the rightful heirs and specify the estate distribution amounts.

So, for example, if the deceased was married and

-  had children from this marriage only, the entire estate would go to the surviving spouse.

-  had children from this marriage and from a prior marriage, then the surviving spouse would receive the majority of the estate (over 50%) with the children inheriting everything else.

- had surviving parents, but no children, then the surviving spouse would receive the majority of the estate, with the parents inheriting everything else.

5.  Some assets are not bequeathed through a Will, and, therefore, are not subject to intestate succession laws.  For example, the deceased may have left the following:

-life insurance proceeds, IRAs, 401Ks, and other retirement accounts for which beneficiary designation forms were completed

- payable-on-death bank accounts

- property transferred to a living trust

- property owned jointly with someone else.

Such assets pass directly to the named beneficiaries or to the surviving co-owners.  In these cases, there is no ambiguity regarding who the beneficiaries are, or what they should inherit.

Getting Legal Help

Losing a loved one is hard enough.  But, when someone dies without a Will, identifying what must be done, and how to navigate through the courts, can be very stressful and confusing.  Experienced Estate Planning Attorney, Elga A. Goodman, can help you meet this challenge and successfully work through the process. Contact us today at 973-841-5111.


9584531 s 300x72 When Theres No Will, Problems May AriseA critical part of estate planning involves preparing your Will.  Doing so helps ensure that your estate will be distributed to your heirs according to your wishes. Unfortunately, many people neglect to prepare a Will.  The reasons are many.  But the bottom line is that once you’re gone, and there’s no Will, things get more complicated for your loved ones.  And, your estate will be distributed according to state law – not according to your wishes!

The following summarizes three issues that arise when a person dies “intestate” (i.e., without a Will).

1.  When a person dies and leaves a Will, the Executor named in the Will is responsible for managing the estate until it is closed out (i.e., all debts, funeral expenses, and taxes are paid, and estate assets are distributed to beneficiaries).  However, when someone dies intestatethe Surrogate’s Court assigns an “administrator” to take on this function.  Most often, the court will appoint a close relative to serve as administrator.  By neglecting to prepare your Will, you’ve given up your right to select the person you prefer to administer your estate.  You’ve placed that decision in the hands of the court.  And that may result in assorted family disputes that might have been avoided.

2.  If you die intestate, you’ve also given up your right to determine exactly who gets what.  The court will distribute your assets in accordance with the state’s “intestate succession” laws.  These laws determine who the rightful heirs are and what share of your estate each of them will receive.   Whether or not you would have selected all or some of these heirs, whether or not their respective shares are consistent with what you would have wanted is not considered by the court.  You gave up your rights and your beneficiaries may consequently suffer.   

3.  If you die intestate, your administrator will be required to post a bond for a specified amount of money as determined by the court.  The bond  serves as security.  If the administrator fails to successfully carry out his/her duties, then the bond will cover resulting damages or losses.  In many cases, the cost of the bond, which must be paid annually until the estate is closed, will be more than what it would have cost to prepare a Will.  And, the bond may pose significant financial hardships for the administrator.

Preparing your Will is the right way to go if you want your estate managed in accordance with your wishes.  You owe it to yourself and to your beneficiaries!

Getting Legal Help:

Experienced Estate Planning Attorney, Elga A. Goodman, can help you with all your estate planning needs.  Contact us today at 973-841-5111.


17223581 l 1 300x200 Estate Planning   Questions About Tangible Personal PropertyPreparing a Will enables you to direct how and to whom your estate will be distributed once you’re gone.  Your estate is comprised of your 

  1. intangible personal property (including cash, IRA’s, 401Ks, bank accounts, insurance policies, etc.),
  2. real estate, and 
  3. “tangible personal property.” 

Many times people wish to be very specific regarding how their tangible personal property will be distributed among beneficiaries.  One option is to itemize such specific bequests in a Will.  Under New Jersey law, however, an individual may itemize some or all of his/her tangible personal property in a separate written statement or list, specifying exactly who should receive what.  This list may be revised by the testator (the person bequeathing his/her estate) as often as desired during his/her lifetime, and does not require an attorney, witnesses, or notarization.  So for example, while a parent may state in her Will that her estate should be equally divided between her two children, she may attach a statement specifying that

- the gold watch goes to her daughter and the stamp collection goes to her son.


- her pearls go to her favorite niece, Alice.

The term tangible personal property is generally understood to mean items that can be felt or touched.  Typical items include clothing, jewelry, art, musical instruments, writings, furnishings and other household goods.  Often, these items are of relatively little monetary value, but of great sentimental worth.  It is important to remember that if you are preparing a separate statement or list, it may only serve to distribute tangible personal property, not cash, securities, negotiable interests or services.

Sometimes, however, it isn’t clear whether or not an item falls under the definition of tangible personal property.   For example, is a collection of gold Krugerrand coins considered cash or tangible person property?  These coins are minted by the Republic of South Africa, and each coin contains exactly one ounce of gold.  Given the potential for error, it’s best to consult with an attorney.  If it’s determined to be cash, then the collection should be bequeathed through the Will, which you must sign along with two witnesses, and which must be notarized.  If it’s deemed to be tangible personal property, then you can just gift it via a separate list, without the need for witnesses or a notary.  And, you can change your mind about who will receive the coins as often as you like.  Just redo the list.

When doing your estate planning, you want to feel confident that the items you bequeath to specific people on a separate list are, in fact, tangible personal property.  You don’t want your bequests to result in disputes among your heirs or in court proceedings because the items were not gifted in a legally correct manner.  

Getting Legal Help:

Experienced Estate Planning Attorney, Elga A. Goodman, can help you with all your estate planning needs.  Contact us today at 973-841-5111.


Estate Planning: Telling your Children What You’re Planning and Why

October 7, 2014

A critical part of estate planning involves identifying your beneficiaries, and specifying what they will inherit.  Parents (particularly those who are widowed or divorced) often designate their children as beneficiaries.  However, problems may arise among the kids depending on how those assets are divided.  Examples abound, but here are just a few: You have three [...]

Read the full article →

The Perils of Inconsistencies Between Divorce Decrees and Beneficiary Designations.

August 28, 2014

The standard language in divorce decrees regarding each party’s obligation to maintain life insurance for the children of the marriage is, in many instances, not sufficient to protect the intended beneficiaries.  To avoid such pitfalls, it is recommended that the two parties negotiate the beneficiary designation language to help insure that the divorce decree accurately [...]

Read the full article →

If You Do Not Want Your Executor to Receive a Commission, Put It In Writing!

August 1, 2014

Unfortunately, when a loved one dies, arguments may arise among the heirs to the estate (also known as the beneficiaries).  One potential area of dispute may involve a commission due the Executor for serving in that capacity.  The following is a brief overview of the Executor’s role, and an example of the type of problem that may [...]

Read the full article →

My Authority Under the The Power of Attorney Ended?

July 1, 2014

One important aspect of estate planning involves the Power of Attorney (POA).  Much confusion abounds regarding when POAs stop being in effect. We hope the following discussion will help clarify this issue. Generally speaking, the POA is a legal document whereby one person (the principal) authorizes another person (the agent) to act on the principal’s [...]

Read the full article →

CCRC: An Alternate Long Term Care Option for Baby Boomers

June 17, 2014

Times change….  That’s a given.  And, for those of us at or approaching retirement, how we expect to live out our senior years has certainly changed.  In the not too distant past, many seniors could expect to live with adult children or other loved ones as their abilities to care for themselves diminished.  But, in [...]

Read the full article →

Observation Stays in the Hospital: The Impact on Medicare Beneficiaries

May 6, 2014

The National Academy of Elder Law Attorneys (NAELA) has designated May National Elder Law Month.  Below is a recent article that appeared in the NAELA: Eye on Elder and Special Needs Issues newsletter.  It addresses disturbing new hospital practices that may severely impact medicare patients. May 2014 Observation Stays in the Hospital: The Impact on [...]

Read the full article →