Do people here usually give beneficiaries for their IRAs and taxable accounts? I have not so far, instead opting to divide my estate (small by most standards) into equal parts in a will. The only way I can figure out that beneficiaries would work is to have four beneficiaries on every one of six accounts. This is what Vanguard says:Think twice before you leave your assets to your estate. Although designating your estate as your beneficiary--either purposely or by default--may seem like a simple way to distribute assets through your will, keep in mind that:* Your heirs may lose additional opportunities to keep the assets tax-deferred, resulting in a smaller aggregate amount available to them. * Your heirs may face higher annual income tax as more of the account's assets are subject to yearly distributions. * Your retirement account assets will be subject to the same settlement costs that apply to your estate. * Any retirement assets paid to your estate may be subject to state inheritance tax.
Naming beneficiaries for the IRA accounts is clearly the right way to go since it allows them to minimize income taxes on those assets by spreading out the distributions over several years.On taxable investments, some states allow POD or TOD arrangements that keep them out of probate.None of these make any difference when it comes to Federal estate taxes. So if the total estate including real estate and life insurance exceeds the Federal exemption (unless its repealled for good one of these days) you would be best off to set up an estate plan. That might include the formation of a trust. Then other choices may be appropriate for the IRA too. Consult the experts before you decide.
IRA guru Ed Slott has a very informative book out this year. The main thing he emphasizes is naming beneficiaries. That allows them to spread the distributions over their life-expectancy (so the younger the beneficiary, the smaller the required distribution & the longer the IRA can last). An estate has zero life-expectancy & ALL IRA assets have to get distributed (& paid taxes on!).Get the book!-dr.nonlinear-
Thanks pauleckler and drnonlinear. It makes me upset that I have to get a lawyer for such a small estate, but I will do so.
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