Beneficiary Designations and Your IRAs
Check Your Beneficiary Designations

Beneficiary Designations and Your IRAs

If you’re like most people, you opened that IRA many years ago. You may not have any idea who you named as your beneficiary. If you have a copy in your files, there’s something you need to do, says The Mercury News in the article “No beneficiary designation for an IRA? Here’s what can happen.” It’s time to dig into your records and take a look.

As part of opening the IRA, you likely signed what’s called a “custodian’s IRA agreement.” In that document, there are provisions that take over in certain instances. One of them is if you fail to designate a beneficiary. Consider these examples, if you don’t think this matters.

A major institution has custody of about 10 million IRAs. In every one of their IRAs, there is a provision that says that if the IRA owner has not by the date of their death, designated a beneficiary or if the beneficiary does not outlive the account owner, the IRA’s beneficiary will be the surviving spouse. If there is no surviving spouse, the beneficiary is the decedent’s estate.

This is not an unusual provision. It gives the institution the ability to transfer the IRA when the owner dies, when there is no beneficiary designation on file. Therefore, a married IRA’s account would pass to his or her spouse. The surviving spouse has the option to transfer the IRA into their own IRA.

However, what if that’s not what you want to happen? Or if you are single?

For someone who is single, widowed or divorced, the IRA passes to the person’s estate under this default provision. If you wanted the IRA to be inherited by a niece, nephew, child or grandchild, it’s too bad. What is worse, is when the IRA transfers to an estate, it loses its connection to a person, thereby losing the ability to be stretched out over an extended period of time.

There are other frequently used provisions. One is a provision that distributes the account to the surviving spouse, or if there is no surviving spouse, to the children in equal shares per stirpes, or if there are no children, to the estate. This works better than the first option. However, unless you review your IRA Custodial Agreement, you don’t know what will happen.

What should you do? As part of your overall estate planning, you should find your beneficiary designation paperwork. If you can’t find it, call the institution that holds your IRA for a copy of what they have on hand. You can also fill out a new beneficiary designation and be certain that the custodian places this paperwork on file and keep a copy of it yourself with your important papers. Otherwise, it’s possible that your updated beneficiary designation wishes may not be followed.

Speak with your estate planning attorney to make sure that all of your documents in your estate plan are updated.

Learn why you should check your beneficiary designations and what happens if they are not up to date.

Reference: The Mercury News (August 12, 2019) “No beneficiary designation for an IRA? Here’s what can happen”

What Happens When Both Spouses Have a Simultaneous Death?
Good Estate Planning Avoids Confusion and Uncertainty Upon Simultaneous Death

What Happens When Both Spouses Have a Simultaneous Death?

There are any number of ways a person can inherit assets from another person. They may inherit assets from a trust, through a will or as a designated beneficiary of an insurance policy or retirement account. However, in each case, says Lake Country News in the article “Simultaneous and close together deaths,” the person inheriting the asset is living, while the person they inherited from has died.

What happens if spouses die either at the same exact time, or at a time that is very close to each other? The answer in a simultaneous death situation, as with so many estate planning questions, is that it depends.

The first question is, did both decedents have estate planning documents in place. If so, what directions do the wills give? Are there trusts, and if so, who are the trustees? If they served as trustees for each other’s trusts, did they name a secondary trustee?

If assets were owned as joint tenancy with right of survivorship, the estate of each deceased tenant receives an equal share of the asset, unless it can be proven that a joint tenant survived the other.

Here’s an example: if a parent dies without a will, is survived by two children, but one of the two children dies only four days after the parent’s death, i.e., fewer than 120 hours, in California, the law presumes that the deceased child did not survive the mother. The sole surviving child’s estate receives the entire parent’s intestate estate.

A beneficiary who survives long enough to inherit, however, might die before receiving complete distribution of his or her inheritance.

A trust may provide for distributions to alternative beneficiaries. This is another reason why it is wise to have primary and secondary beneficiaries on all accounts that permit secondary beneficiaries. Not all accounts permit this.

Similarly, a trust may provide for distribution to alternative beneficiaries. Otherwise, unless there has been advance planning, the undistributed inheritance becomes part of the deceased beneficiary’s estate, where it will be distributed either according to the beneficiary’s will, or according to the laws of intestacy of the decedent’s state of residence.

All of these instances are further reasons why it is so important for everyone to have a will and other estate planning documents prepared.

A probate of the beneficiary’s estate may be required, as a result of an undistributed inheritance.

The legal and factual analysis associated with the distribution of a couple who die at the same time or in close proximity to each other varies from case to case. Speak with an experienced estate planning attorney to have an estate plan prepared to avoid your family having to unravel the knotty mess that is created when there is no will, and no estate planning has been done.

Find out how good estate planning can avoid probate upon a simultaneous death.

Reference: Lake Country News (Aug. 10, 2019) “Simultaneous and close together deaths”

Suggested Key Terms: Simultaneous Death, Estate Planning Attorney, Will, Intestacy, Inheritance, Beneficiary

How Do I Title My Property Correctly for My Estate Plan?
How You Title Assets Is Important Part of Estate Plan

How Do I Title My Property Correctly for My Estate Plan?

The way by which you title your real and personal property and who you name as your beneficiaries is just as important in your estate planning as your will or trust, says The Black Hills Pioneer’s recent article, “Titling of property is just as important as your Will or Trust.”

There are some kinds of property that, depending on how they are titled or who’s the named beneficiary, will flow outside your will or trust.

For instance, if you designate a beneficiary to your life insurance policy or on your retirement account, that money goes directly to the named beneficiary at your death—not in accordance with your will or trust (provided you haven’t named your estate or trust as the beneficiary).

In addition, you could designate another person as payable on death (POD) designee or transfer on death (TOD) designee on your investment account or your bank account. These types of accounts also transfer automatically to the named designee and not with any regard to your will or trust (unless you named your estate or trust as the beneficiary).

Any jointly owned real estate will typically flow to the surviving joint owner, not pursuant to your will or trust. However, the fact that two people own one piece of real estate doesn’t mean the property will flow automatically to the survivor. It depends on how the property is titled. For example, in South Dakota, language needs to be included in the deed conveying that real estate to both individuals as “joint tenants with rights of survivorship.”

You can, therefore, see how critical it is that you discuss these issues with your estate planning attorney. In addition to questions about wills and trusts, you should also be discussing the titling of your property and the beneficiaries you’ve named on your life insurance and retirement accounts, along with any POD and TOD designees you’ve named on your investment accounts or bank accounts.

If you don’t, you create problems for you family and loved ones.

Learn about common asset protection mistakes when titling property and assets.

Reference: Black Hills Pioneer (August 5, 2019) “Titling of property is just as important as your Will or Trust”