IRAs can be used as a way to balance out other bequests, and they can also be used to support other estate planning goals. However, there are also many tax implications to consider when choosing your IRA beneficiaries, according to Morningstar in "Who Should Inherit Your IRA?"
Among your options are to distribute your IRA to your ....
- Spouse - If your spouse is the beneficiary, he or she can roll your IRA into their own. However, it may not make sense to designate a spouse if they are nearing the age of having to take required minimum distributions and will not need the money.
- Child or Grandchild - If they inherit your IRA, then they can stretch the benefits out over their own lifetimes.
- Favorite Charity - Your estate can get a tax deduction if you leave your IRA to a charity. However, it can be complicated, so get professional advice before doing so.
- Estate - Although a simple and easy approach, there is usually not much benefit to naming your Estate as the beneficiary of your IRA.
- Trust - Leaving your IRA to a Trust can be very complicated if you want to avoid adverse tax consequences, but leaving your IRA to a Trust can also achieve significant advantages.
Completing your beneficiary forms is as important and critical as completing your Will, and should be done with the advice and assistance of an experienced estate planning attorney.
Reference: Morningstar (March 2, 2018) "Who Should Inherit Your IRA?"