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Choosing beneficiaries for IRAs

On Behalf of | May 21, 2019 | Estate Planning

Making sure that they have named the right beneficiaries for their IRA is one of the many aspects of estate planning of which Georgia residents should be aware. Not designating someone or not updating the beneficiary designation when needed can result in significant expenses as well as frustration for surviving loved ones. To determine who should be designated, it is important for individuals to carefully consider certain factors.

One issue that has to be addressed is whether the IRA funds are to stay in the family. In situations in which individuals have no family or any desire to leave their IRA to their family, a favorite charity can be chosen as the beneficiary. However, many people tend to want to leave their IRA to family members.

If there is a spouse, that person must be designated as the beneficiary of a 401(k), according to federal law, unless he or she has completed a written waiver. Individuals are not required to name their spouse as the recipient of their IRA unless they reside in a community property state. Depending on the custodian of the IRA, individuals may have to obtain a waiver consent from their spouse if that person is not designated as the primary beneficiary.

In most cases, it is the spouse that is designated as the beneficiary of an IRA. This is best because a spouse can extend the payment of the taxes over the course of his or her lifetime. If someone else is designated, only five years would be allotted to fully pay the account.

An attorney who specializes in estate planning may assist clients with determining who should be designated as beneficiaries of important financial accounts, such as IRAs. A lawyer may also help devise a strategy for ensuring the taxes paid on such assets and the rest of the estate are minimal.