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Naming IRA beneficiaries

One factor that Florida residents should consider when determining to whom to leave their IRA is whether they want the funds to remain in the family. For people who have no family or who do not want to leave the funds to relatives, a favorite charity can be selected as the beneficiary. For individuals who want to leave the money to their family, there are some additional factors they have to take into account.

Marriage is an important detail. Unless their spouse has completed a written waiver, individuals are required to list their spouse as their 401(k) beneficiary according to federal law. If they do not reside in a community property state, individuals do not have list their spouse as the beneficiary to an IRA. It may also be a requirement of the IRA custodian to submit a spousal waiver consent form if the spouse will not be listed as the primary beneficiary.

In many cases, spouses are listed as the primary beneficiary to the IRA. Listing the spouse as the beneficiary means that the payment of the taxes can be extended during the spouse's lifetime. If someone other than the spouse is designated as beneficiary, the account will have to be paid out in no more than five years.

Whether a spouse already has financial resources other than the IRA should also be taken into account. If so, this may be reason to choose someone other than the spouse to be the beneficiary although doing so may result in some consequences.

An attorney who practices estate planning law may assist clients with devising a beneficiary naming plan to ensure that the certain financial assets, such a IRAs, can remain in the family. The attorney may work to create or update all proper legal documents to ensure a smooth transition of funds.

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Kramer A. Litvak, P.A.
226 East Government Street
Pensacola, FL 32502

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