How to Name a Beneficiary for IRAs?

Once you pass away, your IRAs would have to be disbursed to a person of your choice. This person is known as the beneficiary. While you can name any person as a beneficiary for your IRAs, the tax laws may not allow that person to qualify as one. Under the laws, a designated beneficiary has to be a person and not a corporation. However, a qualified trust can be named as a beneficiary for IRAs.

It is important to note that by default there is a beneficiary clause for every IRA plan. If you do not name a beneficiary, then this clause kicks in. Generally, the spouse becomes the automatic beneficiary if no one is named.

In order to make your spouse the beneficiary for your IRAs, ensure that you mention his or her name in the beneficiary designation form. This method of selecting a beneficiary will ensure that no tax problems arise in the future when the monies from the IRA are disbursed upon your demise. In addition, your spouse will have the option of rolling the monies from your IRA account into his or her IRA account.

In order to select a beneficiary, who is not a spouse, then you should use the same procedure as designating a spouse as the beneficiary. Usually, people who are not married select a non-spouse beneficiary. However, it is important to note that a non-spouse beneficiary cannot roll over the funds from your IRAs into theirs.

You also have the option of naming multiple beneficiaries, as long as all of them are humans. This is more common for people who have many children. However, some people want to leave a part of their IRA funds for their spouses and the remaining for a charitable organization. Unfortunately, this is not possible as the charitable organization is not considered as a human. If you want to do this, then open up a second IRA account. Then make a will to state that a part of the old IRA account should be used for the second account, and the funds from the second IRA account should be handed over to the charity or company that is mentioned in your will. The remaining money from the original IRA will go to a human beneficiary that you have designated.

You can also leave the proceeds of your IRA to a trust. The trust should be formed in accordance to the laws of your state and you should follow the rules related to beneficiaries and contributions. The trust is usually irrevocable and once formed, it cannot be altered or changed. The beneficiaries of the trust will receive the proceeds from your IRAs. You can use generic terms like spouse or children without naming them. This is beneficial in case you get divorced and then re-marry.

Source: http://ezinearticles.com/6317337

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