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Four Reasons Why It’s Important to Name an IRA Beneficiary

Who should be the beneficiary of your IRA? The simple answer to this question is the person or entity to whom you wish to leave your IRA assets. However, it’s important to give careful consideration to ensure that your assets are distributed according to your wishes.

Here are four reasons why your IRA beneficiary designation matters:

  1. Your beneficiary designation determines how your IRA assets will be distributed when you pass away.
  2. Naming a beneficiary will help reduce the risk of leaving your assets to unintended individuals or entities.
  3. Your beneficiary designation may impact the distribution options which are available to your heirs.
  4. Failing to name a beneficiary may result in unnecessary probate expenses and delays.

If you do not designate a beneficiary for your IRA assets, your IRA custodian, through an IRA agreement, will provide for a “default” beneficiary. This “default” beneficiary may not be your intended beneficiary, and this may expose your heirs to unnecessary tax consequences and could unintentionally erase years of tax-deferred growth. The default beneficiary on your STRATA IRA is your spouse. If you do not have a spouse, the default beneficiary would be your estate.

You can and should name both primary and contingent beneficiaries for your IRA. If you name multiple primary or contingent beneficiaries, you should also indicate the pro-rata share that each IRA beneficiary should receive.

As the account owner you may change your IRA beneficiaries as often as you like by filing an IRA Beneficiary Designation form with STRATA. This form is available on STRATA’s website at  https://www.stratatrust.com/resource-center/forms/.

This article is part one of a two-part series. Our next article will dive deeper into the types of beneficiary designations that can be made on your IRA and the important impact it carries for estate planning purposes.

For investment professionals wanting more information on a wide range of retirement topics click below and gain exclusive access to our whitepapers.

 

 

ABOUT STRATA TRUST COMPANY

Founded in 2008, STRATA Trust Company has built a reputation delivering streamlined and straightforward custody. Our service-driven team has helped thousands of investors and investment professionals unlock opportunities in self-directed retirement accounts across a wide range of alternative investments. Formerly known as Self Directed IRA Services, Inc., STRATA has strategically realigned to support a broad range of investment professional partners in growing their IRA asset base – always with an eye on the future.

With offices in Austin and Waco, Texas, STRATA operates as a Texas-chartered trust company with direct oversight by the Texas Department of Banking. Led by a seasoned team with over 350 years of collective experience, 33,000+ investors empowered and over $1.8 billion in assets under custody, our customers experience a clear difference in our approach to IRA custody.