Choosing an IRA Beneficiary

If you wish to control who receives your individual retirement account (IRA) payouts after your passing, you do not do so through your will. Instead, you name a beneficiary for the account (and in most cases, a backup beneficiary as well). If you do not designate a beneficiary or do not complete the form properly, you cannot guarantee control over who will receive the money from the account.

Below are a few items to consider when selecting a beneficiary for your IRA.

Naming your spouse

Most people list their spouse as their IRA beneficiary. The biggest advantage of doing so is that your spouse is the only person who can inherit your IRA and continue treating it as if it’s his or her own IRA. This provides your spouse with a significant amount of flexibility. He or she can roll that IRA over or let it stay as an inherited IRA, which allows the recipient to take out distributions as needed.

Keep in mind that once your spouse inherits the IRA, he or she can name anyone to be the subsequent beneficiary. This could be a concern if your spouse had children from a previous marriage and you want to make sure you guarantee your own children can inherit your IRA assets.

Naming a trust

Another popular option is to name a trust as the IRA beneficiary. This protects the assets to ensure a surviving spouse can still use those IRA assets, but will not be able to make any beneficiary changes. This protects those assets to ensure they eventually go to your children, if you so desire.

In some cases, naming a trust as your IRA beneficiary is not practical. If you have only a small amount of money in the account, for example, the cost of having a trustee to oversee the management and distribution of those trust assets may not be worthwhile.

For more information on the factors to consider when choosing an IRA beneficiary, meet with a skilled Tampa estate planning lawyer at BaumannKangas Estate Law.