IRA Beneficiary–What, Why, Who and How?

January 22, 2015 - Posted by: admin - In category:

taxes - No Responses

When it comes to planning and protecting your assets, few things are of greater importance that having a correct understanding of your options and making wise decisions with regard to your retirement account beneficiaries.

Retirement accounts come in many different shapes and sizes. Regardless of which type of retirement saving account you have, the reality is that this is, or someday will be, one of your most valuable and most important assets. To state the obvious, the primary purpose for such retirement savings is to ensure that you and your spouse (if applicable) have sufficient income and assets to live comfortably during the years of your retirement. Thus, even though we will here consider what happens to your retirement savings after you and your spouse are gone, please remember that this is just a secondary consideration and that your VERY best “plan” is to spend the last dollar of your savings on the last day of your life…:) However, given that such a plan of action is somewhat difficult to execute (unless you can accurately predict the future), it is wise to save as much as possible for retirement and that often means eventually saving and accumulating more than you or your spouse will spend during life.  This very often results in assets being available for others after you are gone.

As a general rule, retirement accounts often make up the largest part of such “surplus assets”. Even so, just as your access and use of such retirement savings accounts are restricted during your life, there will likewise be special rules around other people gaining access to your retirement savings accounts after your death. For all of the above-referenced reasons, understanding your options with regard to naming one or more beneficiaries of your retirement accounts is vital. Only with adequate knowledge of certain fundamental rules and realities will you then be in a position to make the best decision for your situation, your family and your objectives.  As with many other parts of the estate planning world, this retirement plan succession and related beneficiary designation is NOT “one size fits all” stuff.  What is wise and recommended for one person and that person’s family is NOT something that is necessarily wise and proper for another person and that other person’s family.

Our friends at WealthCounsel (on organization to which we belong), who own and operate the website, have written a very helpful article titled Who Should Be Beneficiary of Your IRA” and we would recommend that article to you. Even though the article speaks in the context of an IRA (which is one type of retirement savings account–perhaps the most common), most of the concepts and recommendations discussed in this article are equally applicable to other types of retirement accounts, including 401(k) accounts and other types of employer sponsored plans.

Please contact us with questions or concerns about any of these things.  We are here to help!

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