When was the last time you thought about your IRA beneficiary form? If you said never, you’ll want to listen to this episode of Financial Symmetry. If you said when you signed up, you’ll also want to listen.
Many people don’t realize this but their IRA has the opportunity to be the star player of their estate plan. In this episode, you’ll hear about the biggest mistakes people make with their IRA beneficiaries.
Our advisors’ continuing education is designed to help you
As a financial advisory firm based in Raleigh, North Carolina, we strive to help our clients prepare for their ideal retirement. In an effort to ensure that our clients are getting the most value from our services, 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
Your retirement savings is often times the most significant source of assets that you have. People often assume that their will stipulate 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
Resources & People Mentioned
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Chad Smith
Chad Smith is a Certified Financial Planner™. He is an active member of NAPFA, the Financial Planning Association, and FPA’s NexGen. He has been quoted and appeared on WSJ.com, Bloomberg.com, Businessweek.com, Msn.com, Financial Planning Magazine, Triangle Business Journal, and Investment News.
Allison Berger
As an experienced Financial Advisor and partner, Allison builds custom financial solutions to enhance today and enrich tomorrow for our Wealth Management clients. Allison has a particular interest in working with clients in or on the cusp of retirement who want to delegate their portfolio management so they can enjoy life.