Ralph Bovitz, CPA, PFS

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IRA Beneficiary Designation Forms


By Ralph Bovitz, CPA, PFS 

     IRA (Individual Retirement Account) distribution regulations enacted last year, become final this year.  Many financial institutions may or should revise their Beneficiary Designation Forms, as a result.  The Beneficiary Designation Form specifies who will receive your IRA account balance after your death.  Often times, financial institutions do not create beneficiary designation forms with the best choices for IRA owners.  Instead, the IRA custodians focused on minimizing their own administrative burden. Faulty Beneficiary Designation Forms can result in thousands or even millions of dollars going to the wrong person or persons and the imposition of income taxes earlier than necessary.

     Therefore, I encourage you to take a careful look at your existing IRA Beneficiary Designation Forms and see if they meet your current needs and desires.  Some things to look for as you read your Forms: 

q       Be sure that the primary beneficiary or even contingent beneficiaries on your previously filled-out Forms are not now deceased. (The result of that deficiency may require the payout of benefits over a shorter period than is tax wise or to the wrong person.)

q       Unless that is your intention, be sure that the primary beneficiary is not a former spouse.

q       If your IRA account is your principal asset, use care in designating the beneficiary so that your Credit Shelter Trust can still be funded at your death  (The result of that deficiency is possibly increased estate taxes for the family unit.)

q       Review default provisions in the Beneficiary Designation Form, in the event of the death of one or more beneficiaries.  (The result of that deficiency is the family of the deceased beneficiary may lose distributions.)

     If you have IRA accounts at several institutions, you need to read each Beneficiary Designation Form individually.  Since the Forms are not necessarily uniform, from institution to institution, some of the shortcomings outlined above may be present in some Forms and not others.

     Again, thousands or millions of dollars may be at stake, depending upon the size of your IRA accounts.  Taxation earlier than necessary may also be the result of faulty Beneficiary Designation Forms. I encourage you to read your own Beneficiary Designation Forms for, at least, the items listed above and question your IRA custodians if the Form does not meet your financial planning goals, in the event of your death.  There is no tax requirement to do this review of the Beneficiary Designation Forms and there is no due date to make the review.  The review is only for your own peace of mind.

     If you desire assistance in this effort, please call me.  Fees for this service will vary, based upon the number of IRA accounts you have and the complexity of the institutionís Beneficiary Designation Form. Preparing amended language to the Forms may be necessary and the services of your estate-planning attorney may be needed.





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