You have a number of choices when it comes to selecting a beneficiary (or beneficiaries) for your IRA. Some are appropriate. Some are mistakes and can lead to delays and expenses in getting the funds to your desired recipients. Some may even exclude some of your desired beneficiaries. In addition, some elections are for estate planning purposes. Let’s take a look at your options.
No Beneficiary
Not recommended. This mandates your IRA be distributed according to your will, if you have one. If you don’t, each state has intestate rules that divide your estate up in ways you wouldn’t ever want.
An IRA with no beneficiary must be distributed within five years. By contrast, a named beneficiary can spread the distribution out over the balance of their life expectancy.
Your Estate
Naming your estate as the beneficiary is the same as not naming one. The rules require a named beneficiary. Now your IRA goes through the probate process. This costs money, takes time and subjects your IRA to your creditors.
Why should you pay money to be represented by an attorney and have a judge in some probate court decide whom your beneficiary...
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