Did you know that you can name a beneficiary for your retirement accounts? Doing so will allow your accounts to pass to your chosen heirs outside of probate. This could provide your family with a fast cash supply for your final expenses if other estate holdings are tied up in probate. Retirement accounts can also provide a steady source of income for your family and help your children or grandchildren pay for college..
To allow your account to pass outside of probate, it is important to list a beneficiary. You can do so on an account beneficiary designation form provided by your financial institution. Some accounts allow you to name more than one heir, but be advised there may be special requriements if you do not intend that heirs should receive an even split of funds. If you name only one beneficiary, you are disinheriting any others you would like to have part of those funds. Your beneficiary is not required to share account funds and doing so may cause him or her income tax as well as gift tax problems.
You can also use an IRA Trust to hold all of your IRA accounts. This type of Trust may limit the access your loved ones have to your retirement funds, but it could also provide them with long term financial support.
It is not necessary or a good idea to use a Living Trust as the heir of your accounts since your account can already circumvent probate with a named beneficiary.
To make sure your family can easily access funds after you pass away, make a list of all retirement accounts and what benefits you are currently receiving. (You should also list similar information regarding all of your other non-retirement accounts and perhaps include information about your social security benefits.)
With each account be sure to list the account number, financial institution and any other information pertinent to accessing account funds.
The information in your account list will be sensitive, so be sure to store it in a safe location such as a safe deposit box or home safe. Let your estate executor or trustee know where that information can be found as well as where you keep account statements.
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