• Bio

Manya Deva Natan

Manya Deva Natan is a California Bar Certified attorney with the law firm of SSS Legal & Consultancy Services located in Calabasas, CA. Her practice focuses on International Estates, Trusts and Estates, Asset Protection, Trust Administration, and more. Manya received her law degree from Stanford University, as well as a Master's in International Affairs from Columbia University. She has completed extensive course-work and training in the areas of mental, physical, and emotional health, including being a published author. She is the founder of two publishing-based companies related to health and wellness and has particular interest in the legal and financial components of health and their importance in integrated health. She has appeared multiple times on Good Morning America and is regularly contacted by national media outlets for commentary.

Some of the most generous provisions of the tax code are those that permit beneficiaries of IRAs and other qualified retirement plans to defer income tax on the plans until time of withdrawal. This allows the IRA or qualified plan to grow significantly more than if it were subject to tax on gains each year.

Another equally generous provision of the tax code permits beneficiaries to withdraw only a minimum amount from IRAs or qualified plans each year. By taking only these “required minimum distributions” a beneficiary can stretch out distributions over the better part of his or her lifetime, resulting in further deferral of income tax on the amount remaining in the plan.

Unfortunately, most beneficiaries fail to take advantage of this latter provision and withdraw all of the IRA or qualified plan funds immediately, thereby losing the significant tax advantages of tax-deferred growth.

A recent Senate proposal would have required that beneficiaries withdraw the entire IRA or qualified plan within five year’s of the plan participant’s death. Fortunately the Senate proposal died upon arrival, but this is an excellent reminder that retirement plans are assets that need proper planning.

A common misconception is that one should not name a trust as beneficiary because it’s overly complicated and doesn’t permit a stretch out. While naming a trust does add a thin layer of complexity, a properly drafted trust not only permits the stretch out but it is the only approach that ensures maximum income tax deferral, if that is your objective.

Unfortunately there is no “one size fits all” answer here. Rather, this is best decided after consultation with professionals who understand these issues.

A recent Wall Street Journal online article titled Inherited IRAs: a Sweet Deal A Generous Benefit for Families Survives a Senate Challenge discusses this issue but takes the overly simplistic approach when it comes to naming a trust as beneficiary of an IRA or qualified retirement plan. The full article is available online at http://online.wsj.com/article/SB10001424052702304587704577335751592771924.html.