FAQs About Passing on Retirement Accounts

Q: I have designated my children as beneficiaries of my retirement account. What happens if one of my beneficiaries dies before me? Does their share go to their children (my grandchildren)?

A: No. This is a common misconception. If one of your beneficiaries passes before you do, their share of your retirement account is divided up among the remaining primary beneficiaries. The contingent beneficiaries don’t come into play unless NONE of the primary beneficiaries are available.

For example, my grandfather had his three children as the beneficiaries of his IRA. Unfortunately, my mother had passed away back in July 2017. If no changes were made to his IRA before my grandfather passed, then the funds would have been split among his two remaining children, rather than my mother’s share going to her children and grandchildren (his grandchildren and great-grandchildren) as he wanted. This is one reason it is so important to review beneficiary designations when something happens to a loved one.

Q: I have a trust. I have heard that it’s important to put my assets into my trust – can I put my IRA (401k, etc) into my trust?

A: No. It is possible however to name your trust as a beneficiary of the retirement plan, but you should only do that if the trust has been designed for that purpose. This is a subject that should really be discussed with your attorney. I am unaware of any do-it-yourself trust plans that handle retirement accounts well if at all. This is what estate planning can help with.

Q: If I have named beneficiaries on my retirement accounts, would those funds have to go through probate?

A: No. As with payable-on-death (POD or TOD) designations on other bank accounts and beneficiary designations on life insurance, retirement funds can pass directly to the named beneficiaries without going through probate.

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