Jim Lorenzen, CFP®, AIF®
Have you reviewed your beneficiary forms lately? You should. IRA mistakes there can’t be fixed after the IRA or plan owner dies.
The two biggest problem areas most prone to beneficiary form: Divorce and trusts. Problems often arise when someone erroneously believes that a trust takes care of naming the beneficiary for IRAs. It doesn’t.
When someone names a trust in a will as the IRA beneficiary, a problem can arise when a new will is prepared with no trust named. Most new wills revoke the old ones – so the trust under the first will no longer exists as a beneficiary leaving no named beneficiary.
Other problems arise when a trust is created to inherit an IRA but never named on the IRA beneficiary form. The trust must be named on the IRA beneficiary form; and if a new trust is created to inherit the IRA, the IRA beneficiary form must be updated again.
Make sure your IRA beneficiary forms name the correct beneficiary – and contingent beneficiaries. And, if the trust is named, make sure it’s still accurate.
If you want to learn more about IRAs, I’m never hesitant to recommend Ed Slott’s books and DVDs. He’s one of a very minute number of ‘gurus’ (you’ll often find him on PBS) who is actually the ‘real deal’ (he’s also a CPA) when it comes to dispensing well-researched retirement and taxation knowledge.
Hope you find this helpful!
Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and an ACCREDITED INVESTMENT FIDUCIARY® serving private clients since 1991. Jim is Founding Principal of The Independent Financial Group, a registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.