Naming Primary Beneficiary
My husband and I established a trust in 2017. Should it be named as our primary beneficiary on all our financial investments (including IRAs and Roth IRAs), insurance policies, and bank accounts? Currently, we list spouse as primary and then our two daughters as secondary beneficiaries. We want to avoid probate and taxes. Thank you.
Terry Says
As I’m sure your attorney told you, the spouse should be named the primary beneficiary of retirement accounts, because spouses get a longer time to make the money grow. For example, a spouse can roll an inherited IRA into her/his own IRA — thus delaying withdrawals till the beneficiary is age 73. All withdrawals are eventually taxed as ordinary income.
IRAs do not go through probate, so your daughters as secondary beneficiaries are the correct choice, as well. And their required withdrawals will be taxed as ordinary income.
But none of these is taxed at death — And in fact, no Federal estate taxes apply unless the estate
is over $15 million!
