Structuring your IRA concerns
A recent Morningstar article provides some good advice in terms of Doís and Doníts for leaving IRA assets to your heirs:
Check with your estate planner prior to naming IRA beneficiaries. The beneficiary form and your will should be in sync and an estate planner can also advise you on any pitfalls to avoid, like leaving your IRA outright to a minor child or your estate.
Consider a charity as beneficiary. The charity will receive the assets tax-free and your estate will benefit from a charitable deduction.
If you wonít need to tap into your traditional IRA during your lifetime, convert to a Roth. Assets will compound tax-free for your heirs and when they inherit, they wonít owe any income tax on withdrawals.
Make sure your spouse knows how to handle your IRA assets. An older spouse will probably benefit most from rolling inherited IRA assets into their own account, but a younger spouse who may need the money before turning 59 Ĺ will need a different strategy.
Fail to name or update beneficiaries for IRAs. If no one is named, the IRA administrator will decide who gets the assets. If you forget to change the beneficiaries after a divorce, death or other major life event, whomever is on the designation form still gets the assets. Also, if you switch providers, beneficiaries will not carry over so be sure you name them on your application form.
Name your estate as beneficiary. If you name your estate as beneficiary of your IRA assets, you hamstring the beneficiaries of your estate on tax savings, because they will be required to take distributions within a specified period of time.
Name a minor child as beneficiary. Minor children cannot be named as beneficiaries of retirement plans, so if you want to leave IRA assets to a minor, consider setting up a trust.