What to do with an IRA when estate planning

What to do with an IRA when estate planning

Making a decision about the designated beneficiary of an IRA might be fairly easy. People, charities, trusts or an estate could be named. However, it is also easy to make mistakes when naming a beneficiary. Here are some of the things you should know when leaving an IRA behind.

Have the Paperwork in Order

To avoid confusion and arguments later, it is important to update estate planning documents and your IRA when changing a beneficiary. Having the proper paperwork in order is important because the IRA beneficiary designation usually takes precedence, so it should match what is in a will or trust.  If it does not match, then you should make sure that you intend for the difference.

Naming a Spouse

Spouses can roll the other’s IRA into their own name, which is beneficial if a spouse is eligible to delay required minimum distributions. If a spouse does not need the other partner’s IRA and has already passed the RMD age of 70 ½, it may be better to leave an IRA for someone else if another loved one will benefit more.

When Another Loved One Inherits

For another loved one to get the most tax-saving benefits from an IRA, it would be ideal to leave an IRA to someone who does not need the funds quickly. When not using the money right away, one can roll the money into an inherited IRA. For this to work, the grantor must name them on the designated beneficiary form. You should also discuss this with the beneficiary so that they know your intentions and what is expected.

There are several options when leaving behind an IRA. For more information about this topic and estate planning in general, contact us today.