I have some questions based on the recent David Braze article "Have you checked your IRA Lately?"When I was a teacher, I began savings with the 401 whatever that was for teachers. When I retired, I rolled it over into a traditional IRA. 1. Quoting from the last paragraph: "First, ensure that your IRA will allow both the beneficiary designations and the MRD method you want. If not, switch to a provider that will. Next, review your IRA beneficiary designation(s), know how your provider will calculate yourMRD, and make sure the IRA allows the greatest flexibility for distribution to beneficiaries on your death." I hate to admit this, but I haven't a clue who I would ask about these things. I don't know the provider is. I have just gone on assuming that when I die, the companies I'm invested in send my investments to my daughter, she pays the taxes and remainder is divided between her and my son. Can you clarify this? 2. Some of my IRA funds were invested in Schwab when the time came to start taking withdrawals. Their investment advisor said it would be to my advantage to set up withdrawals based on a Joint Life Expectancy, mine and my daughter's, to minimize income taxes. I gathered from the above article that this would preclude me from including my son as a beneficiary at my death? If this is the case, is there anything I can do, say with a lawyer, to insure that he becomes an equal beneficiary with my daughter?3. I have always assumed I had one IRA which I had divided up among several different investments, with different companies. But once divided, does my original IRA now constitute several IRAs?Thanks for any light you can provide.
Each IRA must have named beneficiaries. The broker orCustodian of your IRA has a form you must fill in and designate each (if more than one), with a percentageindicated for each beneficiary. You can change beneficiaries any time by filling a new form and depositing it with the broker. These documents arelegally binding on the Custodian and bypass any Willyou may have setup. On the issue of life expectancy,visit Managing Your Finances/Tax Strategies messageboard. One excellent posting that addresses some ofthese issues is "Bobbcat" #24225 and I'm sure thereare many more. Be sure check the FAQ index on this board for some super foolish help! - - Matthew
Mattpam: Thank you for your reply. I am relieved to have confirmed that my broker is my custodian, as I had always assumed. Also relieved to note that my beneficiary designations are valid. My question was based on something I read that I understood to say that the person named in the joint life expectancy information was in fact the only beneficiary and that nothing could change that - it was written in stone. Thanks again.
Greetings, NoelXX, and welcome. You wrote:<< My question was based on something I read that I understood to say that the person named in the joint life expectancy information was in fact the only beneficiary and that nothing could change that - it was written in stone. >>Seeing as I wrote the article, perhaps I can clarify what you think you read. When you reach age 70 1/2, you must begin minimum required distributions (MRD). If you use your life and the life of a designated beneficiary to do so (i.e., a joint life expectancy), then the beneficiary on your account at the time MRD begin cannot be changed for future MRD. If that beneficiary predeceases you, you cannot use a new beneficiary to determine subsequent MRD factors. That means at your death, the IRA must be paid out and taxed to whoever you designated as a new beneficiary no later than December 31 of the year following your death. (Unlike the original beneficiary, the new one cannot take the money over his/her lifetime to lessen taxes.) So for MRD purposes and MRD purposes only, the beneficiary you choose at age 70 1/2 is locked in stone and can never be changed. However, you can still have a new beneficiary for remaining IRA proceeds should the old one die first. You just cannot take MRD based on the new beneficiaries life expectancy.Regards..Pixy
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