IRAs are designed to plan for retirement and they are great estate planning tool. This is why appointing beneficiaries is an important step in account establishment. A great deal of thought should go into designating the right beneficiary for your IRA.
The most commonly appointed beneficiaries are spouses, children, grandchildren, other loved ones, trusts, churches, or charities. Along with naming a primary beneficiary, the IRA owner should also consider designating a contingent beneficiary. This is done in case the primary beneficiary predeceases the IRA owner. If an IRA is left without a designated beneficiary, the estate might become the default, which can produce unfavorable tax results. Each beneficiaries account must be established by September 30th of the year following, the year of the original IRA owner’s death.
The required minimum distribution (RMD) for every type of beneficiary depends on whether the IRA owner passes away before or after the required minimum distribution (RMD) beginning date. RMD tables are generally split into spouse, non-spouse, and no designated beneficiary categories. Spouses have more options than other beneficiaries because they can treat the IRA as their own or as a Beneficiary IRA.
Due to the complicated rules and potential tax consequences associated with inheriting an IRA, the owner should consult tax, legal, and accounting professionals for advice when making beneficiary decisions. Contact Mountain West IRA to verify you have updated the beneficiary’s listed on your account; please take into consideration childbirths, marriages, divorces, a family members death. Visit the Mountain West IRA website to learn more about IRA required minimum distributions and the options available to beneficiaries.