Who's the BOSS: Part 4, Survivors

If you die without a surviving spouse, who will be the beneficiary of your IRA? Most people assume it’s their children but if your retirement plan beneficiary forms are not up to date, your estate could be the default and render the treasuries of the United States and your home state as your beneficiaries! The estate is the most common default beneficiary designation, not surviving heirs.

What if your primary beneficiary/ beneficiaries pre-decease you? Have you considered that possibility and named contingent beneficiaries? A lot of people stop at naming one primary beneficiary, which is usually their spouse. What if your spouse has predeceased you and you did not get around to updating your beneficiary forms before you passed away? What if your primary beneficiary decides to disclaim the IRA assets? These are very real situations that negatively impact inherited IRA assets every day. Every IRA owner must anticipate such scenarios and plan accordingly.

Financial Legacy or Tax Bill?
Approximately 87% of all IRAs are cashed out upon the death of the IRA owner. Many people who inherit IRAs think their only option is to cash it out. Because of this common misconception, they take a lump sum distribution and lose out on the opportunity for tax deferred growth and a much higher payout over their lifetime.

Do you have a bad exit strategy, or worse, no strategy at all? Do you have a good exit strategy that allows you and your heirs to enjoy exponential growth and increased wealth that may be passed on for generations? These questions cannot be answered without going through a BOSS review.

You may be sitting on what you think is a “good” exit strategy only to find that the beneficiary forms are not up to date or they have not been filled out properly.

Custodians are not infallible either. Do you have confirmation that the respective custodians received and accepted the most current beneficiary designation form? Does the custodian’s form permit a multi-generational strategy? If not, are customized beneficiary forms accepted by the custodian? We all have the choice to leave a financial legacy or a tax bill to our heirs.

Communicate With Heirs
It is very important to do a BOSS review. It is very important to make sure all retirement plans are structured the way you want. It is equally important to communicate your intent and IRA distribution plan with your heirs. You may have engaged in careful planning to ensure your beneficiaries can maximize the benefit of your IRA but if they are unaware of how the MGIRA strategy works, they could unknowingly make a fatal, irreversible error! Although it may be an uncomfortable topic, it is crucial to have that uncomfortable conversation so your heirs will know what you have set up for them, what their options are, and how to execute your carefully crafted plan when the time comes.


Avoid Another Common Error
A common beneficiary error occurs with respect to CDs. No, this is not a reference to your music collection, but what about your certificates of deposit, are they in order? When conducting a BOSS review, don’t forget about your CDs. Did you renew any of them? Does your institution automatically renew your CDs? If so, did you submit anew beneficiary designation form? Be careful with this, once a CD matures and has been renewed, a lot of institutions will treat it as a new account. This means that a NEW beneficiary form must be submitted and accepted by the custodian. When conducting your annual BOSS review, remember to check those POD (“payable on death”) designations on your CDs and pay special attention to any renewed CDs.