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Planning for the unavoidable (death and taxes)

They say that the only things certain in this life are death and taxes. Of course, with an Individual Retirement Account, you can put money away tax-free to build a nest egg. The money in an IRA can be passed on to heirs as well, growing for them as it grew for you.

In order to take advantage of an inherited IRA, it's important to understand some rules and deadlines for both spouses and non-spouses, a recent article by Kiplinger states. Before any of that takes place, however, an IRA owner must be certain to name the beneficiaries -- especially critical if you want to bequeath your IRA to a non-spouse.

When a person is named as a beneficiary on the IRA form, they can stretch out the distribution of its funds over their lifetimes. If no beneficiaries are named, the IRA can't be stretched out, Kiplinger says, and the tax shelter is no more.

"Depending on the amount inherited and given enough time, the beneficiary may not have to put another dime into their own retirement because of that compounding growth" of the IRA, said a financial planner.

An inherited $500,000 IRA could be worth a million dollars tax-free in 25 years (even with annual distributions), Kiplinger states. But if the heir takes all the funds out of the IRA at once, he or she "would lose a lot to taxes," the adviser says.

Also important: "One of the most important things to know is that an IRA passes outside of the estate," said a retirement products VP. The IRA goes directly to beneficiaries, making it critical to keep that beneficiary form up to date so that your money goes where you want it to go.

An attorney experienced in estate planning and asset protection can help you take care of your wealth today and take care of your loved ones tomorrow.

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