IRA Beneficiary mistakes, part II.
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Making mistakes with your IRA can be costly. There are simple mistakes that can be avoided. As a member of Ed Slott’s Master Elite IRA group I have extensive training on avoiding these mistakes.

It is much more common that people realize. After spending just a few minutes with me people realize that there are potential issues they were *never* told about.

Without the extensive training I have, I’d think the accounts were setup properly too….(read more)

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In Part 1 of our article about IRA beneficiary mistakes, we covered some common errors that individuals make when naming beneficiaries for their IRA accounts. In Part 2, we will continue with additional mistakes that can have serious consequences for you and your heirs.

Mistake #4: Naming a trust as your IRA beneficiary without proper planning
Many individuals believe that naming a trust as the beneficiary of their IRA account is a good way to ensure that their heirs are protected and their assets are distributed according to their wishes. While this can be a valid strategy, it must be done with careful planning and the assistance of an experienced estate planning attorney. Failure to properly structure the trust and comply with tax laws can result in unintended tax consequences and costly litigation.

Mistake #5: Failing to update your beneficiary designations over time
Life is constantly changing, and your financial and personal circumstances can change as well. Failing to review and update your beneficiary designations on a regular basis can result in unintended consequences. Beneficiary designations take precedence over any other estate planning documents, such as a will or a trust, so it is important to ensure that they are up-to-date and reflect your current desires.

Mistake #6: Neglecting to consider the impact of taxes on your beneficiaries
Many individuals do not consider the tax implications of their IRA account when naming beneficiaries. Depending on the type of IRA account and your heirs’ tax situations, they may be subject to income tax and estate tax upon receipt of the account assets. Careful planning can minimize the tax impact and ensure that your beneficiaries receive the maximum benefit from your IRA account.

Mistake #7: Failing to communicate your wishes with your beneficiaries
Naming beneficiaries to your IRA account is a personal decision and one that should be communicated with your loved ones. Failing to discuss your wishes with your beneficiaries can lead to confusion, miscommunication, and potential conflict among family members. Open and honest communication can help avoid these issues and ensure that your beneficiaries understand your intentions.

In conclusion, naming beneficiaries to your IRA account is an important decision that requires careful consideration and planning. Avoiding these common mistakes can help ensure that your heirs receive the maximum benefit from your IRA account and minimize the risk of unintended consequences. Working with a knowledgeable financial advisor and estate planning attorney can help you navigate these complexities and ensure that your IRA account is structured to meet your specific needs and goals.