How to Designate an Individual Retirement Account Beneficiary
When you open an IRA, you need to designate a beneficiary. IRAs are a bet against the future that you will be there to reap the benefits of your foresight in paying yourself first. If the unthinkable happens, however, you do not want your years of sacrifice to go to the government. Designating your beneficiary is easy, and keeping it up to date is just as simple. Just fill out the correct form and send it to whoever maintains your account.
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Things You'll Need
- Designation of Beneficiary form Advice from your tax attorney (optional)
Instructions
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Decide who you want as your beneficiary. In some states, if you are married, your spouse is automatically your beneficiary unless he signs a form to surrender the rights. Spouses are advised to consult with a tax attorney before doing so, however. It is better to give a specific name for your beneficiary rather than stating "my heirs," or "my children."
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Get accurate information. You will need your beneficiary's Social Security number, name, birth date and address to complete your designation of beneficiary form. Obtain a Designation of Beneficiary form from the financial institution which handles your account. Provide all requested information to the best of your ability.
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File your form according to the instructions given by your financial institution and keep a copy of the form in a fireproof home safe or in safety deposit box at your financial institution. Update your beneficiary form if your beneficiary moves, gets married, divorced or dies.
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Read the information "You, not the IRS, should benefit from inherited IRA," in the link in Resources and make sure your beneficiary does as well. If you begin taking distributions from your IRA, be sure to let your beneficiary know that. Your beneficiary could wind up with a huge tax liability if he fails to begin taking distributions on time. According to Teri Cettina of Bankrate.com, "...the designated beneficiary of an inherited IRA doesn't need to begin taking distributions from the account until Dec. 31 of the year following the IRA account holder's death."
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Resources
- Photo Credit http://www.savvysugar.com/1020038
