estate planning
How to Fund Your California Living Trust Checklist
How to transfer your assets to your California Living Trust to avoid probate
Naming primary and contingent beneficiaries of your IRA is an essential part of your estate plan
Make sure you correctly name the beneficiaries of your IRA so your estate plan will work and your trust administration goes smoothly.
How to name your IRA beneficiaries.
If you are married
Primary beneficiary:
Spouse
Contingent beneficiary:
If you have adult children, name them individually.
50% James Garcia
50% Alexandra Garcia.
If you have minor children and your living trust has asset protection sub-trusts for your children, name each sub-trust.
50% to the Joseph and Mary Garcia Family Trust FBO James Garcia
50% to the Joseph and Mary Garcia Family Trust FBO Alexandra Garcia
(FBO = for benefit of)
If you have minor children and you are ok with them having control at 18, then name them directly, the same as above for adult children.
If you have no children, you can name your family or friends individually, the same as above for adult children. Or, you could name your favorite charity as your contingent beneficiary.
If you are not married
Primary beneficiary: Children, the same as above. If you have no children, name your family or friends individually. Make sure you also name contingent beneficiaries.
If you are charitably inclined
If you were going to leave some of your estate to your favorite charity, you may want to name your charity as the beneficiary of your IRA. If you name your children or other individuals as the beneficiary, they will have to pay income tax on the inherited IRA distributions. A charity does not have to pay income tax, and therefore, it will receive 100% of your IRA.
Don't name your living trust as primary beneficiary
If your children or other beneficiaries are adults, we usually don't recommend naming your living trust as your IRA beneficiary. If your living trust is a "see through trust", which most are, it can be an IRA beneficiary, but it makes it more complicated for the financial institution, your living trust successor trustee and your living trust beneficiaries to work it out. Much simpler to name individuals as your IRA beneficiaries. The exception is if you have minor children.
Don't forget to update your IRA beneficiaries
If you named your spouse as your primary beneficiary and she dies, you need to name new IRA beneficiaries. If you die without IRA beneficiaries, your IRA may have to go through probate.
Make sure you periodically review and update your IRA beneficiaries.
Living trust funding chart
Click here to download our handy living trust funding chart.
Annual review with your financial advisor
If you have a financial advisor (and we recommend that you have one), you should review your IRA beneficiaries during your annual account review.
Footnote: our reference to IRA applies to any qualified retirement plan: 401k, 457, etc.
