non-spouse beneficiary re-naming inherited IRA
Hi Terry, I’ve been putting together informational guides for the kids to access when we’re both gone. I know that it is vitally important for the kids to re-name the inherited IRA’s. I’ve got several different accounts in the same financial institution; the different accounts represent holdings in different funds, some accounts hold my Roth investments, and some hold my annuities. So my question is: do I have just one IRA in this financial institution OR do I have multiple IRA’s? and does each account need to be re-named?
Terry Says
After your death, the beneficiary will give copies of the death certificate to the IRA custodian and the account will be transferred into an “Inherited IRA”. Then for sure, each new IRA owner will be asked to name a beneficiary of his or her choice. The custodian will also instruct them about the laws then in effect for taking required distributions from the account. Those laws recently changed, limiting the ability to stretch out the growth of the inherited IRA — whether traditional or Roth — without making withdrawals.
You have three important jobs to do where your IRAs are involved:
1. Make sure you have listed a beneficiary — an individual (or two) and a backup beneficiary if the first is deceased) for EACH account.
2. Make a list of your IRAs — AND the named beneficiaries. And the location of the account. And a contact phone number or file with the latest annual statement of value.
3. EDUCATE YOUR CHILDREN AND OTHER BENEFICIARIES now — not to take the money and run, but to leave it grow tax deferred in the inherited account as long as possible!
Most annuities don’t have beneficiaries — but some do. Check with the annuity insurance company to make sure you do have a beneficiary and that person is correctly listed and your current choice. You bank will have nothing to do with an insurance annuity — so be sure to put these accounts on your list, along with a contact phone number.
BUT remember – only retirement accounts, insurance policies and some annuities have beneficiaries. Any stocks you own in your name will become part of your estate — distributed according to your will (or revocable living trust if the stocks are held in an account in the name of the trust). Without a trust, the stocks could be tied up in probate for months, perhaps while the stock market falls. Make sure you have discussed these issues with a competent estate planning attorney in your state of residence.
