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Faizan
Retirement accounts can hold hundreds of thousands of dollars at the time the account owner dies, and they can be the most valuable assets you leave behind. If you want your spouse to inherit these accounts when you die, you must complete certain paperwork to ensure she is able to receive the funds without unnecessary hold-ups. Otherwise, the money could get tied up in court or your current spouse could lose out entirely.
Fill Out the Forms
The beneficiary designation process varies slightly depending on the type of retirement account you have and the company that holds the account. Typically, the company that administers your retirement account will have a beneficiary designation form for you to name your chosen beneficiaries. Contact your administrator, such as your investment adviser or human resources department, to get a copy of the form. Once you have completed the form and given it back to the administrator, you may wish to follow up later to ensure your designation form was properly placed in your records.
Keep It Current
Beneficiary designations typically do not change unless you deliberately change them. Since it is your beneficiary designation form that controls what happens to your retirement account when you die, you can periodically review your form to make sure it still accurately reflects your wishes. For example, if you list your spouse as your beneficiary but later divorce, your beneficiary designation remains in place. Unless you change the designation, your ex-spouse will likely inherit your retirement account upon your death.
Alternates and Joint Beneficiaries
Typically, you can name alternate beneficiaries to inherit your retirement account upon your death. For example, you might choose to name your spouse as the primary beneficiary and your son as the alternate beneficiary. Upon your death, your spouse will inherit the entire retirement account if she is still living. If she is not, your son will inherit the entire account. If you do not want one beneficiary to inherit the entire amount, you can also direct that your beneficiaries inherit jointly. However, some states and retirement plans place limits on your ability to leave your retirement account to anyone other than your spouse. For example, spouses are typically entitled to inherit the other's 401(k) plan unless the surviving spouse has signed a waiver giving up that right. In some states, retirement accounts are considered community property so the surviving spouse is entitled to half of the deceased spouse's account.
Your Spouse Has Options
With most types of accounts, your spouse can choose to roll over the account into her own retirement account, such as an individual retirement account or 401(k). A roll-over allows the spouse to let the money continue to grow tax-deferred. She can also leave the account in your name as an inherited IRA. If she does this, she must begin taking distributions from the account on December 31 of the year after your death or the year you would have turned 70 1/2, whichever is later, and she must pay taxes as she withdraws money from the account. Your spouse may have other options depending on the exact type of retirement account you leave behind.
Fill Out the Forms
The beneficiary designation process varies slightly depending on the type of retirement account you have and the company that holds the account. Typically, the company that administers your retirement account will have a beneficiary designation form for you to name your chosen beneficiaries. Contact your administrator, such as your investment adviser or human resources department, to get a copy of the form. Once you have completed the form and given it back to the administrator, you may wish to follow up later to ensure your designation form was properly placed in your records.
Keep It Current
Beneficiary designations typically do not change unless you deliberately change them. Since it is your beneficiary designation form that controls what happens to your retirement account when you die, you can periodically review your form to make sure it still accurately reflects your wishes. For example, if you list your spouse as your beneficiary but later divorce, your beneficiary designation remains in place. Unless you change the designation, your ex-spouse will likely inherit your retirement account upon your death.
Alternates and Joint Beneficiaries
Typically, you can name alternate beneficiaries to inherit your retirement account upon your death. For example, you might choose to name your spouse as the primary beneficiary and your son as the alternate beneficiary. Upon your death, your spouse will inherit the entire retirement account if she is still living. If she is not, your son will inherit the entire account. If you do not want one beneficiary to inherit the entire amount, you can also direct that your beneficiaries inherit jointly. However, some states and retirement plans place limits on your ability to leave your retirement account to anyone other than your spouse. For example, spouses are typically entitled to inherit the other's 401(k) plan unless the surviving spouse has signed a waiver giving up that right. In some states, retirement accounts are considered community property so the surviving spouse is entitled to half of the deceased spouse's account.
Your Spouse Has Options
With most types of accounts, your spouse can choose to roll over the account into her own retirement account, such as an individual retirement account or 401(k). A roll-over allows the spouse to let the money continue to grow tax-deferred. She can also leave the account in your name as an inherited IRA. If she does this, she must begin taking distributions from the account on December 31 of the year after your death or the year you would have turned 70 1/2, whichever is later, and she must pay taxes as she withdraws money from the account. Your spouse may have other options depending on the exact type of retirement account you leave behind.
Posted in: Estate Laws
