Deciding who should inherit your retirement account is an important part of estate planning. You have several options that are available.
When many people pass away, they will still have a lot of money in their individual retirement accounts for a beneficiary to inherit. It is important to decide who that beneficiary will be, in a way that fits your overall estate plan.
· Spouse - If your spouse is the beneficiary, he or she can roll your IRA into their own. However, it might not make sense to designate a spouse, if they are nearing the age of having to take required minimum distributions and will not need the money.
· Child or Grandchild - If they inherit the IRA, then they can stretch the benefits out over their own lifetimes. However, as a practical matter, few do so because they need the money.
· Charity - Your estate can get a tax deduction, if you leave your IRA to a charity. It can be complicated, so get expert advice before filing out a beneficiary designation form.
· Your estate - There is not much benefit to naming your estate as the beneficiary. However, if you cannot decide on another option, you can do so.
· A trust - Ordinarily, there is no benefit to leaving your IRA to a trust. However, if the beneficiary would otherwise be a minor child or unable to manage their finances, it might be necessary to do so.
Reference: Morningstar (March 2, 2018) "Who Should Inherit Your IRA?"