Orange County Estate Planning Attorney James F. Roberts answers FAQ and gives information on what is currently happening in estate planning.

For married people typically their beneficiaries on things such as IRAs, 401Ks, and other qualified funds is our spouse. There are definite tax benefits from naming your spouse as your IRA beneficiary rather than someone else.

Those benefits are not available to any other beneficiary other than the spouse. If a person passes away and named their spouse as their primary IRA beneficiary for these types of account then their spouse is the only beneficiary that can roll that IRA for their now deceased spouse into their own IRA.

One of the main benefits is that the surviving spouse can now delay taking their distributions until reaching 70 and 1/2 years old and can still use the joint life expectancy table because it is now their IRA. This major benefit is one of the reasons that our office recommends naming the spouse the beneficiary of an IRA.

For more information please contact our office or call us at 714-459-5481 or come to one of our free monthly seminars!…(read more)

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Why Your Spouse Should Be the Primary Beneficiary to an IRA Account

When it comes to your individual retirement account (IRA), deciding who should be named as the primary beneficiary is an important decision. While there are various options to choose from, selecting your spouse as the primary beneficiary can offer significant advantages. Let’s explore why your spouse should be the primary beneficiary to an IRA account.

1. Tax Advantages: By designating your spouse as the primary beneficiary, you can ensure the continuation of tax-deferred growth within the IRA. Spousal beneficiaries have the option to treat the inherited IRA as their own, which allows them to delay required minimum distributions (RMDs) until they reach the age of 72. This postponement can be advantageous for maintaining the account’s growth potential and minimizing the tax burden.

2. Spousal Rollover: As the primary beneficiary, your spouse has the option to roll over the inherited IRA into their own IRA. This process, known as a spousal rollover, offers financial flexibility, as it allows your spouse to merge the inherited IRA funds with their existing retirement assets. The consolidation presents an opportunity for improved portfolio management, increased control over investment choices, and simplified record-keeping.

3. Access to Funds: In the unfortunate event of your demise, designating your spouse as the primary beneficiary grants them direct access to the IRA funds without the need for probate. This avoids additional legal complications, delays, and expenses for your spouse during an already challenging time. Your spouse can utilize the funds for their own financial needs or execute a qualified rollover, ensuring uninterrupted retirement planning.

4. Preservation of Wealth for Future Generations: Nominating your spouse as the primary beneficiary allows for a seamless transfer of wealth to future generations. If your spouse doesn’t completely deplete the IRA during their lifetime, they can pass the remaining funds to your children or other beneficiaries. By doing so, you can extend the tax-deferred growth potential of the account and create a lasting financial legacy for your loved ones.

5. Protection in Case of Divorce: In the unfortunate event of a divorce, having your spouse as the primary beneficiary provides additional security. In many states, divorce settlements often consider IRAs as marital assets subject to equitable distribution. By naming your spouse as the primary beneficiary, you can ensure that they retain sole control over the inherited IRA, limiting the potential for disputes or claim to the funds by other parties.

While designating your spouse as the primary beneficiary offers numerous benefits, it’s essential to assess your specific situation and consider any unique circumstances. Additionally, keep in mind that spousal beneficiaries who are significantly younger than the original account holder may face restrictions on the stretch IRA provisions introduced in the SECURE Act of 2019.

Consulting with a financial advisor or estate planning professional can help you make an informed decision based on your individual needs and goals. By choosing your spouse as the primary beneficiary to your IRA account, you can ensure financial security for both them and future generations, while taking advantage of the tax benefits and flexibility provided by the arrangement.