This is a short educational YouTube segment ("IRA Beneficiary Mistakes, Part 2") by Rick Loek of ixrayretirement.com/Calrima Financial. Loek explains beneficiary vs designated beneficiary (a designated beneficiary must be a living person), warns against naming the estate, advises naming charities directly on beneficiary forms, and summarizes post-death actions: handling the required minimum distribution in the year of death, titling and splitting inherited IRAs (must be split by December 31 of the year following death), successor-beneficiary rules (mentions age 83 as a stretch reference), trustee-to-trustee transfers for non-spouse beneficiaries, cautions about naming trusts as beneficiaries, and the possibility of "unconverting" a Roth conversion if its value falls. The video closes by offering a complimentary IRA beneficiary review and giving a toll-free number.
Questions this video answers
By December 31 of the year following the year of death.
Toll-free number stated as 866-589-9366 (the speaker repeats an alternate rendering as 866-589-9936).
Chapters
I am Rick Locke with ixrayretirement.com hosted by Calrima Financial and Insurance Agency. Ixrayretirement.com utilizes a proprietary system to create your personalized 30 year retirement plan that addresses all of your retirement needs and wants. I'm a member of Ed Slott's Master Elite IRA Advisor Group. Ed Slot is what the Wall Street Journal calls the nation's best source of AIRA advice. I have Ed Slott's entire team of AIRA technical analysts on call. I'm the founder and president of the Silicon Valley chapter of the Society for Financial Awareness, also known as SOFA. SOFA's mission is to create financial literacy.
Which we do through providing pro bono training sessions at local companies and civic organizations.
Once Again, this is IRA Beneficiary Mistakes.
IRA Beneficiary Mistakes, Part 2.
Another critical distinction, beneficiary versus designated beneficiary. Anyone or any company, any charity could be named as a beneficiary. And what we're saying is a designated beneficiary is a living, breathing human being. It's possible to name the estate as a beneficiary. That would be a bad idea though. And the general rule says never ever do this.
You could also name a charity as a beneficiary. Don't do this through the will. If you want to name a beneficiary, name them directly on the beneficiary form. If you name them through the will and the IRA goes through the will or through the trust or into the estate, then taxes are going to be paid by the estate, not by the charity. The whole point of naming a charity is that they get it tax free, income tax free. The catch is if you leave them on the beneficiary form directly, they must be cashed out by September 30th of the year. After the year you pass away.
Post death instructions to the family. Well, here's a couple of things to take into account. Correct handling of the required distribution in the year of death. Working with a couple right now. Well, a gentleman, his ex wife passed away earlier in the year and now his children are saddled with having to figure out if mother had actually taken her required minimum distribution. And how to process that kind of a complex process. Does one of the children take a the distribution or do they each take a distribution? And how does that work? Something that we can certainly help families with in that situation, inheriting the IRA and getting it titled properly splitting the IRAs. Now you don't have to split the IRA in the year that the person passes away. But you must split the IRAs by December 31st of the year following the year of death. And once again now in the inherited IRAs, the beneficiaries will have to take their own required distributions as well. And keep in mind that the beneficiaries now get to name successor beneficiaries. If the person you named as your beneficiary is say your child and they don't manage to live through age 83, that is, if they don't manage to live through age 83, their subsequent beneficiaries can continue to stretch the distributions through the time that your beneficiary would have attained the age 83.
Further, post death instructions for the family dealing with life insurance proceeds. If there was life insurance in the family plans or the estate plan, it's important to get that processed as well. If for some reason you named an IRA as the IRA trust as the beneficiary. Very complex, very few reasons to actually name a trust as a beneficiary for an ira. Working with several couples right now that purchase these amazingly looking trusts that have a few shortcomings. So keep in mind, even an expert or somebody who's putting themselves out as an expert may not actually be as expert as they need to be.
And then if it's important or warranted, maybe there's a need to change the investments within an inherited Iraq trustee to trustee Transfer is the only way for non spouse beneficiaries to transfer money. If they have a check made out to them, they lose the ability to stretch the ira. And then of course time to address your beneficiaries estate plans. If they haven't actually dealt with that, we need to work with them to address their beneficiary plans.
Other areas to consider are Roth conversion if an IRA is converted to Roth and if it has lost subsequent or substantial value. If a Roth IRA conversion has lost substantial value, there may be a desire to unconvert it and get those taxes back from the federal government. This concludes this segment of the IRA Beneficiary mistakes. Thank you.
IRA Beneficiary Review Complimentary IRA Beneficiary Review for those of you who have watched the video or any portion of the video series, you may call us and request your complimentary comprehensive IRA Beneficiary review. Our toll free number is 866-589-9366. Once again, that's 866-589-9936. Make a phone call, request the beneficiary review and I look forward to speaking with you in the future. Thank you.
