Are You Making These IRA Beneficiary Mistakes? Ep #196

When was the last time you thought about your IRA beneficiary form?

If you’re a Modern Family fan, you should enjoy today’s episode.

Today, we’re diving in the mistakes made when we make assumptions about our IRA beneficiary forms.

Many people don’t realize this but their IRA has the opportunity to be the star player of their estate plan.  In this episode, we walk through real world examples, to help you take steps now to avoid similar pitfalls in your own lives.

Our advisors’ continuing education is designed to help you

In an effort to ensure that our clients are receiving the most current and meaningful advice, we encourage our advisors to seek continuing education opportunities. Recently, Allison had the opportunity to attend the Ed Slott IRA conference. In this episode, she shares her takeaways.

Retirement accounts are separate from other inherited assets

For many, your retirement savings will be the most significant asset you will accumulate. But too often, we see people who’ve assumed that their will is the document that directs where their retirement assets go, but this isn’t true!

IRAs and 401Ks actually bypass probate and go directly to the listed beneficiaries. These monies are not exposed to the same tax laws as other inherited assets so you’ll want to make sure that you have the right beneficiaries named.

Update your beneficiary forms regularly

The beneficiaries of these assets are solely stipulated by the beneficiary form that you filled out when you set up your account. This is why it is so important to update it regularly so that it reflects your wishes.

If you make the mistake of not naming a beneficiary you cannot assume that the funds will go to the beneficiaries named in your will. This is often not the case.

Don’t assume your employer knows your beneficiaries

Another common mistake is that people assume that their employer has their beneficiaries on file. As with most things, you’ll want to avoid this assumption. Often times there have been custodial changes due to mergers and acquisitions and the original documents no longer apply.

Others simply assume that their spouse will inherit everything. There have been many cases of exes inheriting the funds or other contentious outcomes.

A spousal waiver is required to name a non-spouse primary beneficiary

If you would like to name a non-spouse primary beneficiary, it is crucial that your spouse sign a spousal waiver. Even in the case of a prenuptial agreement, a spousal waiver is required.

The last thing you want your heirs to do upon your death is deal with costly litigation. If you don’t want them to go to court, you’ll make sure to update your forms regularly.

Listen in to hear what other mistakes to look out for when setting up your beneficiary forms on your retirement accounts.

Take full advantage of the Michael Jordan of estate planning: your retirement accounts. If you aren’t quite sure how you want to maximize this estate planning tool reach out to us. We can help to ensure that you minimize tax liability and maximize your tax efficiency.

Outline of This Episode

  • [3:46] Not naming a beneficiary
  • [5:22] Assuming your employer has your beneficiaries on file
  • [8:13] Assuming your spouse will inherit your IRA
  • [11:00] On choosing a non-spouse beneficiary
  • [13:13] Make sure to set up the contingent beneficiaries
  • [15:55] Don’t be too trusting
  • [17:56] Be aware of changing laws
  • [21:58] Today’s progress principle

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