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Virginia Beach Estate Planning Lawyer / Blog / Estate Planning / Don’t Make This IRA Mistake in The Estate Planning Process

Don’t Make This IRA Mistake in The Estate Planning Process

Passing on your IRA to someone you love is a popular choice when engaging in estate planning. However, how you choose to pass this along could lead to unintended consequences for them or even problems that you never expected.

One of the most common mistakes that people make with regard to their IRA is letting these beneficiary forms filed directly with the IRA manager become out of date. Although you may have your estate planning tools that explain what you want to happen to your property after you pass away, the greater priority in a legal sense is given to the documents filed with the IRA company.

If you allow these forms to become out of date because you got divorced and the form still says that your spouse should receive all the benefits, legally, there is nothing your other beneficiaries can do if you never updated those forms. Another common mistake is to put your own estate as the beneficiary of an IRA. If you named a person to take over the account like a child or a spouse, they may be able to use a stretch-out feature to accumulate more wealth over time.

If your own estate serves as the beneficiary, however, that money is passed on to your loved ones sooner rather than later, such as within the next five years, and this can lead to higher taxation and a reduction in the amount of the possible growth for the IRA overtime. This is a bad result all around and one that should be avoided. Talk to a VA beach estate planning lawyer.

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