ElderLaw News — The Estate Planning & Elder Law Firm, P.C. — MD, VA, DC
ElderLaw News

ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President., William S. Fralin, Esq., President.

How to Name Beneficiaries of your IRA

Beneficiary designations are an essential part of your estate plan, especially if you have an IRA. 

As with life insurance policies, naming beneficiaries to inherit your IRA upon your death is an effective way to avoid probate and to ensure that your loved ones become the direct recipients of the account.  Properly designating your IRA beneficiaries will lead to better tax consequences for your heirs; therefore, it is important to understand and carefully consider your options.

Although it may seem like a simple solution to name your estate as beneficiary of your IRA – or to not name a beneficiary at all – this will most likely result in unfavorable tax consequences.  Some more favorable beneficiary designation strategies are as follows:

1. Designate your spouse as beneficiary.

Many individuals will simply name their spouse as beneficiary of their IRAs.  This means that upon the account owner's death, the spouse may roll over the funds from the deceased spouse’s IRA into his or her own IRA.  The spouse may then begin taking distributions based on his or her own life expectancy when he or she reaches age 70 1/2 (if the deceased spouse had already reached that age), or the year the deceased spouse would have reached age 70 1/2.

2. Designate another individual (who is not your spouse) as beneficiary.

If you designate an individual who is not your spouse, that individual may take distributions from the inherited IRA based on his or her own life expectancy.  This generally allows the individual to "stretch" distributions for a longer time period, extending the potential tax-deferred growth of the assets in the account.  Note that if the account owner dies before his or her "required beginning date," however, then the individual who inherits the IRA may be required to withdraw all of the assets over a period of 5 years. 

3. Designate a trust as beneficiary.

Depending on family dynamics and a host of other factors, sometimes it's not the best idea to leave an IRA to an individual outright.  If the person you would like to name as a beneficiary is a minor, a spendthrift, or a recipient of SSI or Medicaid, for example, then the IRA most likely should be left to a trust for the benefit of that individual rather than to the individual outright.  There are special rules relating to naming a trust as beneficiary of an IRA. 

4. Designate multiple beneficiaries.

If you name multiple individuals as primary beneficiaries of your IRA (for example, your children), the life expectancy of the oldest will typically be used to determine the timing and amount of distributions to all beneficiaries after the account owner’s death.  It is possible for each beneficiary, however, to create his or her own IRA ("Inherited IRA") after the original owner's death.  If done by December 31st of the year following the owner’s death, each Inherited IRA owner will be able to take distributions based on his or her own life expectancy.

Regardless of who you choose as primary beneficiary, be sure to name a contingent beneficiary, to ensure that if something happens to your primary beneficiary, the IRA goes to the individuals you want to receive it. 


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The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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