Beneficiary Designations for Retirement Assets


While it is not necessary, nor necessarily desirable, to name beneficiaries on one’s savings, checking and investment accounts, it is essential that retirement accounts have named beneficiaries.  Retirement accounts include IRAs, 401ks, TDAs, 403(b) accounts, and the like.  If one does not name an individual beneficiary or beneficiaries, and these accounts pass to one’s estate, income tax will be due almost immediately, at the estate income tax rate.  The tax rate for an estate is usually substantially higher than the individual income tax rate.  If an individual is named as beneficiary, that individual can draw the money out over time, paying income tax over time instead of immediately, and usually at a lower rate. An annuity is also an asset which should have beneficiaries named, as the growth in the annuity is taxed at ordinary income tax rates, rather than being treated as capital gains. 





 IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.