In most cases,Guest Posting naming your spouse as the beneficiary of your IRA makes the most sense. However, depending on your wishes, other beneficiary arrangements may do a better job of accomplishing your goals.
First, let’s take a quick look at the requirements and advantages of naming your spouse as the sole beneficiary of your IRA. Choosing another beneficiary will cause you to lose some of these advantages.
The first advantage allows the https://s3.us-east-1.wasabisys.com/are-gold-iras-good/are-gold-and-silver-iras-a-good-idea.html spouse to elect to treat the IRA as his or her own. When the objective is to delay the required minimum distributions (RMDs) for as long as possible, the spouse would generally elect this option. This election allows the spouse to postpone RMDs until they reach age 70 1/2 in the case of a traditional IRA or SEP. RMDs are deferred all the way to the death of the spouse if the IRA were a Roth. If the spouse is younger than the deceased IRA owner, this makes a lot of sense where deferral is desired.
Using the life expectancy of the spouse and a beneficiary is one of the spouse’s options, thus potentially extending the payout period. If the spouse were not the sole beneficiary, the life expectancy of the IRA owner and beneficiary is the requirement. Given the fact that the IRA owner is older, this shortens the distribution period.
If the IRA owner dies before age 70 1/2, the spouse can defer the RMDs until the IRA owner would have reached age 70 1/2. If the IRA owner is younger than the spouse is, this could be an attractive option.
Despite these advantages and flexibilities, other beneficiary elections may make more sense.
Marital Deduction Trust
The use of a trust has many advantages such as the ability to “customize” the distribution of trust assets among beneficiaries, tax advantages and the ability to sprinkle income.
One main advantage of naming a marital trust as the beneficiary of your IRA is to include a QTIP provision (Qualified Terminal Interest Property). This allows the IRA owner to control where the property passes upon the death of the spouse. The most obvious use of a QTIP election is to make sure the children or a person are not disinherited due to the spouse’s own subsequent beneficiary election or a second marriage.