Page 13 - Leisure Living Magazine May 2016

Why Naming Beneficiaries Is So Important
By Christopher McIntire, President, McIntire Retirement Services www.mcintireretirementservices.com
Today it seems like everyone has a 401k, IRA, or some form of retirement account that allows workers to set aside pre-tax money for their retirement years. This money grows tax deferred until age 59 1⁄2 when you may begin withdrawing it without paying a 10% penalty on early withdrawals. There are numerous exceptions to these rules that aren’t the subject of this month’s article. We are also only talking about taxable retirement accounts not Roth IRA’s or Roth 401k’s.
It is very important to have beneficiaries listed on those accounts in the event of a death, untimely or not, of the account owner. When this occurs, the IRA custodian (TD Ameritrade, Fidelity, the bank, etc...) will pay the remaining balance to the beneficiaries listed on the account forms. Many times these documents were filled out in haste to get an account opened and off to work you went. I’ve seen numerous occasions where the IRA owner only named a spouse as the primary beneficiary. That’s perfectly fine. However you also want to name contingent beneficiaries because it is possible that both spouses may be involved in an accident and both perished.
This untaxed money will follow the beneficiary form and it is vitally important to have at least primary and contingent beneficiaries named. This keeps the distribution options available and can prevent a forced distribution or a fight over the money in probate court. It also saves money from taxation.
$100,000 only needs to withdraw approximately $2062 and pay tax on that amount because their life expectancy is 48.5 years per IRS guidelines. Each year they are required to take the required minimum distribution and can maintain the inherited IRA for decades of tax deferred growth and income.
There is no 59 1⁄2 age rule for distributions when inheriting the IRA, only the required distribution the year following the death of the IRA owner. You must pay tax on the money and by setting up an inherited IRA you have the option of when it makes sense to take larger withdrawals.
There are many more technical aspects to inherited IRA’s than space allows me to describe. Make certain your financial advisor or tax advisor is educated in handling these types of accounts as mistakes can be costly to correct. It is important to handle IRA money correctly whether you’re inheriting it or not.
Thanks for reading folks, enjoy spring at the Lake!
Investment advisory services offered through Brookstone Capital Management, LLC. (BCM), a Registered Investment Advisor. BCM and McIntire Retirement Services are independent of each other.
Under current legislation IRA beneficiaries have a number of options for withdrawing money from these accounts. Avoiding a lump sum or five year payout may be very advantageous to the beneficiary based upon their tax bracket when they receive the money. One of the more attractive options is to take the life expectancy payout when inheriting the IRA. Quite simply, once the “inherited IRA” is setup, the beneficiary is required to take a distribution based upon their individual life expectancy. For example, a 35 year old beneficiary who sets up the inherited IRA of
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