Estate Planning

The Importance of IRA Beneficiaries

The Importance of IRA Beneficiaries

Estate Planning

Individual Retirement Accounts (IRAs) are a key part in estate planning. Upon your passing, your IRA(s) will be distributed according to the beneficiary designations, even if your will and/or trust(s) instruct assets to be transferred differently. You identify your primary and contingent beneficiaries upon opening your IRA — but how often do you review them?

A common misconception is that IRA beneficiaries are covered under a will or trust. An example of a common mistake is to instruct the trust to be distributed to all children equally and list the executor as the primary beneficiary of the IRA with the intention that they will then distribute assets equally amongst the children. This complicates asset distributions for the executor and there is no guarantee that the IRA assets will properly be transferred to the children.

In addition to listing primary beneficiaries, it is important to name contingent beneficiaries in case the primary beneficiary predeceases the IRA owner or if the primary beneficiary wishes to disclaim his or her interest after death.

When a beneficiary inherits an IRA, they are able to take required minimum distributions (RMDs) out over their lifetime. This is referred to as a stretch IRA. The RMDs are taxable and it is generally advantageous for the beneficiary to stretch them out over their lifetime rather than taking a lump sum taxable distribution from the IRA. This stretch feature is lost when no beneficiary is designated.

When designating an IRA beneficiary, you may select the option “per stirpes.” This means that if one of your beneficiaries predeceases you, their share of your IRA is equally distributed to their children. For example, if your two children are 50% primary beneficiaries on your IRA and one predeceases you, their share will go to your grandchildren. By selecting “pro rata” instead of per stirpes, their share will be allocated to the living beneficiary.

The retirement accounts that you worked so hard to build up should be distributed according to your wishes at your passing. The only way to ensure this is to designate primary and contingent beneficiaries and to update those beneficiaries as life events occur. At Schultz Financial Group, we assist clients in reviewing IRA beneficiary designations every other year and when life events, such as births, deaths, weddings, and divorces, occur. Feel free to reach out to us if you have questions about your beneficiary designations.

 

Important Disclosure Information: The information contained within this blog is for informational purposes only and is not intended to provide specific advice or recommendations. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Schultz Financial Group Incorporated), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Schultz Financial Group Incorporated. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Schultz Financial Group Incorporated is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Schultz Financial Group Incorporated’s current written disclosure statement discussing our advisory services and fees is available for review upon request. Please Note: Schultz Financial Group Incorporated does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Schultz Financial Group Incorporated’s web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Where you want to go in life is up to you. How to help you get there is up to us.

Contact us today to start your journey…

Contact

Schultz Financial Group Inc.
10765 Double R Blvd. Suite 200
Reno, NV 89521
Phone: (775) 850-5620
Fax: (775) 850-5639
Email: info@sfginc.com

Where you want to go in life is up to you. How to help you get there is up to us.

Contact us today to start your journey…

Contact

Schultz Financial Group Inc.
10765 Double R Blvd. Suite 200
Reno, NV 89521
Phone: (775) 850-5620
Fax: (775) 850-5639
Email: info@sfginc.com

Design by Jason Design Studio | Design by Refresh Design Services | Copyright © 2018 Schultz Financial Group Inc.

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Copyright © 2018 Schultz Financial Group Inc.

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