One of the most important estate planning decisions that many people make, is who should inherit IRAs.
For many people, deciding who should be the beneficiary of their retirement accounts is something that is not thought about for too long. The decision is made quickly and the person chosen is usually a close relative.
Parents who are not married will write down their children.
Younger people might just write down their parents or a sibling.
However, if an IRA is consistently paid into and wisely invested, it can grow to be of tremendous value. It is often one of the biggest assets that people have when they pass away.
That means IRA beneficiaries should be carefully considered and chosen wisely, as Morningstar discusses in "Who Should Inherit Your IRA?"
The bottom line is that the beneficiary of your IRA should be chosen based upon where the money will do the most good.
Since there are different tax implications for different types of beneficiaries, you should consult with an estate planning attorney.
Doing so will help ensure that your IRA and the rest of your estate can be distributed to heirs in a way that is fair for everybody and has the fewest negative tax implications for everyone.
Beneficiary designations should be done as part of your overall estate planning. Therefore, you should seek professional advice.
Reference: Morningstar (Sep. 10, 2017) "Who Should Inherit Your IRA?"