The designated beneficiary listed on your IRA account beneficiary form determines who gets your IRA. This is true even if your will or trust names different beneficiaries. You may have completed that beneficiary form long ago, and no longer remember who you designated as your beneficiary. Perhaps your family circumstances or marital status have changed. Whenever your family circumstances change, you should review your beneficiary designations. You may have named an ex-spouse as your beneficiary and now may not want him or her to receive your IRA.
If you have recently remarried and want your IRA account to go to your children, your new spouse may have to sign a waiver of rights to your retirement benefits. Otherwise, the IRA might go automatically to your new spouse. This is also generally true for employer plan benefits.
If you have a trust and want the IRA proceeds to go to the trust, then you should name the trust as the beneficiary. There is no tax advantage to naming a trust as the beneficiary of an IRA. Of course, there may be a non-tax-related reason, such as controlling a beneficiary’s access to the money. Thus, naming a trust rather than one or more individuals to inherit the IRA should achieve that goal. However, that is not typically the case. Naming a trust as the beneficiary of an IRA eliminates the ability for multiple beneficiaries to maximize the opportunity to stretch the required minimum distributions (RMDs) over their individual life expectancies.
Worse yet is if your IRA does not have a designated beneficiary. When there is no beneficiary form on file, you are really rolling the dice. Your retirement assets go to whomever the IRA trustee has named for you in the default language in the documents for the account.
When you complete the beneficiary designation form, you have the opportunity to designate one or more contingent beneficiaries, who will inherit the IRA if the primary beneficiary passes away before you. For example, you could name your spouse, as the primary beneficiary, and your child and brother as next in line if your spouse pre-deceases you. This is a safety net of sorts in the event you don’t change the primary beneficiary after that person passes away.
Don’t take chances. Make sure your IRA beneficiary designations are up to date, and that you correctly specify who you want to receive your IRA in the event of your death. If you have questions, contact the Experts at Henssler Financial: experts@henssler.com or 770-429-9166.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
