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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 institution’s 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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