Beneficiary

About IRA Beneficiaries

     When opening an IRA, one of the many decisions you must make is the choice of who (or what) will be the beneficiary of the IRA assets.

     This decision has far-reaching consequences, because the choice of beneficiary will affect you during your life and will likely continue to have an effect on the beneficiary long after your death.

     The rules for designating a beneficiary are the same for Traditional, SEP, SIMPLE and Roth IRAs.

Choosing a Beneficiary

     Most IRA documents permit an individual to designate primary and contingent beneficiaries.

     If the IRA owner dies, the IRA assets will eventually pass to the primary beneficiary, provided that the primary beneficiary survives the IRA owner and does not "disclaim" the right to the assets.

     If the primary beneficiary does not survive the IRA owner, or disclaims the IRA, the IRA assets will pass to the contingent beneficiary. If the contingent beneficiary does not survive the IRA owner's death either, or disclaims, then the assets will pass as if no designation were made, unless the IRA document designates a beneficiary.

     Naming any beneficiary other than the estate will cause the IRA to bypass the probate process. This does not mean that the IRA will avoid estate taxes or avoid being subject to other aspects of estate administration, such as the payment of the decedent's debts.

     Beneficiary designations must be supplied, in writing, to the custodian of the IRA. This designation will determine who will receive the IRA assets when the IRA owner passes away, not the IRA owner's will.