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I am in the process of updating beneficiaries to 401(k), traditional IRA and Roth accounts. The current primary beneficiaries are (in some cases) my spouse and (in some other cases) my children. Does it make a difference taxwise who my beneficiaries are?

I would ignore the tax situation and focus on what you really want to accomplish with any assets that survive you. Your beneficiaries have no obligation to share amongst themselves. So any jiggering you do for tax purposes could interfere with your wishes.

As to direct tax consequences, there aren't any with regard to inheritances at the federal level. Some states still have an inheritance tax assessed against the beneficiaries, but spouses and direct descendents are usually exempt.

The only possible issue with leaving too much to your spouse is that you might push the total assets of the second-to-die over the estate tax threshold. Of course, from where we stand today, who knows what will happen with regard to estate tax.

Ira
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