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With proper planning an inherited retirement account such as an IRA can be an investment windfall, however without planning it could end up costing the beneficiary significantly.
Retirement accounts are distributed according to the language of the contract and not through a will or living trust. If there is just one mistake such as filling out the beneficiary form it can destroy all the growth potential.
The following is a checklist to consider:
Find out who the beneficiaries are – designation form must be filed with the bank or financial institution holding the account.
Take the owner’s last distribution – check to see if the owner if 70 and a half took their minimum distribution in the year of their death.
Consider a disclaimer – beneficiaries who don’t need the money can turn down the inheritance.
If it’s a company plan, roll it over – set up an inherited IRA either as a traditional or a Roth.
Re title the account – if a non-spouse you must re title the IRA.
Split the account – if more than one beneficiary has the custodian split the account.
Consider a spouse’s option – Spouses have options not available to non-spouses seek professional help to determine what is best.
Name a successor – Someone who inherits an IRA may designate who will in turn inherit after their death.
Take the first distribution – Non spouses must withdraw a min. amount each year.
Daniel Iuculano, AAMS CMFC
Accredited Asset Management Specialist
Chartered Mutual Fund Counselor
