Naming the Beneficiary of Your Retirement Fund

Naming the beneficiary of your retirement fund is a big decision that will have far-reaching implications for family members long after you’re gone, and is therefore not something that should be undertaken lightly. Before choosing how much to bequeath and to whom, take the following pointers under advisement:

You can designate more than one beneficiary and specify the portion each person is to receive.

When opening a gold IRA, you’ll have the opportunity to name your primary and secondary beneficiaries. You may have more than one primary beneficiary and can divide your assets among them in any proportion you wish. If your primary beneficiary doesn’t survive you, your assets will fall to the secondary beneficiary. Failure to name a beneficiary will result in your estate receiving the distributions.

Spouses are often entitled to special tax advantages under the law.

Naming your spouse as the primary beneficiary on your gold IRA or other retirement account carries special tax advantages that may not apply to non-spousal beneficiaries. For example, in most states your spouse would be able to roll over your IRA into his or her own IRA without penalty until distributions begin. However, we still highly recommend getting a professional tax advisor’s opinion before making any decisions.

The named beneficiary on your gold IRA account supersedes the named beneficiary of the same account in your will.

If you name one child as the beneficiary on the Beneficiary Designation form associated with your retirement fund and name a different child as the beneficiary of the same fund in your will, the child listed on the Beneficiary Designation form will have first claim on the assets. To avoid confusion or lengthy probate suits, be sure your legal documents reflect your wishes and do not contradict each other.

Consider the tax burden that will fall on your beneficiary.

Retirement accounts are not like real estate, bank accounts, stocks, and other types of assets that pass on to beneficiaries tax-free. Instead, your beneficiary must pay the IRS mandated tax rate for the fund type upon distribution. Therefore, a 401(k) and a traditional IRA would be taxed, thereby leaving your beneficiaries with less net income. Funds from a Roth IRA, on the other hand, would be distributed on a tax-free basis.

Your beneficiary may be a trust or charitable organization.

Are you estranged from your family or are you deeply passionate about a social or political cause? If so, you may name a trust or charitable organization as your primary beneficiary rather than a single individual. Doing this often involves numerous tax and legal entanglements, so consult with a professional first.

Naming the beneficiary of your retirement fund may not be as straightforward a task as it first appears. Because of the various tax, legal, and financial ramifications of this move, be sure to give the decision the deep thought and consideration it requires.

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.