Law Office of Amy B. Van Fossen, P.A. - Elder Law

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How to choose an IRA benificiary

An IRA can be a very valuable investment vehicle for retirement, but many people in Florida make the mistake of not having a beneficiary named. When no beneficiary is listed, the funds from an IRA go directly into the person’s estate upon death, and this can complicate things for family members who should be able to benefit. Not only does it make who gets the money confusing, but it can significantly increase the tax liability.

There are several important questions a person can ask when deciding who name as their beneficiary for their IRA. The first is whether or not they intend to keep the money within their family. Unlike a 401(k) spouses are not required to name their partners as their beneficiaries, but the custodians of some IRAs will require a written waiver from a spouse if the IRA owner wishes to appoint someone else.

Some individuals will want to name their children as beneficiaries instead of their spouse, especially if the spouse will already be well off financially. When there are two or more children, it’s crucial to set up the designations correctly as a mistake could leave an heir disinherited. In some cases, a party may want to skip a generation and leave their IRA to their grandchildren. This can be done for tax reasons or because children will already receive other assets.

When deciding who will become a beneficiary of an IRA, an estate planning attorney may be able to provide valuable support and guidance. It’s the responsibility of a lawyer who works on estates to stay up to date with all laws that affect wills, trusts, retirement accounts, and other issues related to inheritance. They might help their client come up with a legal strategy to protects assets for heirs while minimizing the overall tax burden.