Annapolis, Maryland Wills, Trusts & Estate Planning

Why A Roth IRA Isn’t For Everyone – Annapolis Estate Planning

Some of the features of the Roth IRA make it look like a traditional IRA on steroids. There are no required minimum distributions and you have the ability to take withdrawals before you retire and you can even contribute to your Roth IRA after age 70 ½. However, it’s not for everyone.

A major factor in deciding whether or not to have a Roth IRA or a traditional IRA is your income. If you earn too much, you can’t contribute to a Roth. However, if you are in the early stages of your career and aren’t earning much, you may want to open a Roth now. That way, when you stop working and your income level drops, the Roth will be a great retirement income source because contributions are taxed but withdrawals are not.

Investopedia’s recent article, “When Not to Open a Roth IRA,” explains that both types offer distinct tax advantages for those saving money for retirement. However, they work somewhat differently.

With a traditional IRA, you invest pre-tax dollars and pay income taxes when you withdraw the money in retirement. You pay tax on both the original investments and what they earned. However, a Roth is the opposite: you invest money that’s already been taxed at the ordinary rate and withdraw it and its earnings tax-free at a later date.

In deciding one over the other, the key question is whether your income tax rate will be higher or lower when you start withdrawing funds. The other difference between the accounts is that RMDs are mandated by traditional IRAs. These are cash withdrawals from the account (on which you pay taxes) that must begin the year following the year in which its owner turns 70½. Roths have no RMDs.

For younger workers who have yet to realize their earning potential, Roth accounts have a definite edge. This is because when you first enter the workforce, it’s quite possible that your effective tax rate will be in the low single digits. Your salary will probably go up over the years. That means you’ll have greater income, and quite possibly be in a higher tax bracket in retirement. There is, therefore, an incentive to front-load your tax burden.

However, the opposite might be true, if you’re in your peak earning years. If you’re in one of the higher tax brackets now, it may have nowhere to go but down in retirement. If that’s the case, you’re probably better off postponing the taxes by contributing to a traditional retirement account.

For the most affluent investors, the decision may be a moot point, because of IRS income restrictions for Roth accounts.

One thing is sure: there is no one-size-fits-all retirement account. You’ll have to look at your short- and long-term plan for investing and saving before deciding. The most important thing to remember: start saving early and be consistent about saving, even if you can only put aside a small amount every year.

Reference: Investopedia (October 5, 2018) “When Not to Open a Roth IRA”

Holden & Campbell, LLC – Annapolis Estate Planning

Often Overlooked, But Critical to an Estate Plan: Beneficiary Designations - Annapolis Estate Planning

Out-of-date beneficiary designations could completely undo your entire estate plan. It happens often since people often neglect these ‘fine print’ details.

We hope that you have a will to ensure that your assets are distributed according to your wishes after you pass. However, if you are like most Americans, many of your assets are not distributed through your will, but through a beneficiary designation, which you may not have thought about since opening up the retirement account, 401(k), IRA or SEP or taking out a life insurance policy. A word of warning: regardless of what’s in your will, the beneficiary designation takes precedence.

Benzinga’s recent article addresses this question: “Estate Planning: What Are Per Capita And Per Stirpes Beneficiary Designations?” Have you changed the beneficiary designations since the account or policy was first started? If you need to update your beneficiary designation, talk to the company responsible for maintaining the account. They’ll send you a form to complete, sign and return. Keep a copy for your own records.

You should also name a contingent beneficiary to receive the account, in case the primary beneficiary passes away before you can update the beneficiary list. Without a listed contingency, your account designation goes to a default based on the original agreement you signed and the state law.

With per capita distribution, all members of a particular group receive an equal share of the distribution. Within a will or trust, that group can be your children, all your combined descendants, or named individuals. Under per capita, the share of any beneficiary that precedes you in death is shared equally among the remaining beneficiaries. Within a beneficiary designation, per capita typically means an equal distribution among your children.

Per stirpes distribution uses a generational approach. If a named beneficiary precedes you in death, then the benefits would pass on to that person’s children in equal parts. Spouses are generally not part of a per stirpes distribution. Assume that you had two children. With per stirpes, if one child were to precede you in death, the other child would receive half, and the children of the deceased child would get the other half.

Create a list of all your accounts that have beneficiary designations and keep it with your will. If you don't have a copy of the latest beneficiary designation form, write down the primary beneficiary, contingent beneficiary, and the date the beneficiary designation was last updated for each one.

Your estate plan needs to be kept up to date, and that includes your will, power of attorney documents and just as important, your beneficiary designations.

Reference: Benzinga (December 26, 2018) “Estate Planning: What Are Per Capita And Per Stirpes Beneficiary Designations?”

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What Are the Rules About Inheriting an IRA? - Annapolis Estate Planning

The rules are strict and mistakes can be costly.

Inheriting an IRA is not like inheriting any other asset. You’ll need to be very careful to follow the rules. Usually the parent is the beneficiary and the children (or grandchildren) are the successor beneficiaries. Here’s how it works, as described in nj.com’s recent article, “Inheriting an inherited IRA? Your payout choices will be limited.”

Per IRS rules, if you die prior to withdrawing all the funds from an inherited IRA, then the beneficiaries are bound by the same Required Minimum Distribution (RMD) schedule that they’d chosen when they inherited it.

A person will typically choose either his own life expectancy or the life expectancy of the original plan participant, whichever’s longer. The successor beneficiaries must then keep withdrawing what’s left, according to that same schedule.

However, it’s different if you leave your own IRA to your children. In most circumstances, children who inherit an IRA would be able to withdraw the funds over their own life expectancies.

Note: this is the general rule. The IRA rules are quite complex, and there are many exceptions to the general rules. Ask the financial institution where the IRA is held, if they have any rules concerning their IRAs that may change the general rules.

With an inherited IRA, you need to take annual distributions no matter what age you are when you open the account. This doesn’t apply, if you've simply transferred another IRA to your own IRA.

Again, as a general rule, you must take distributions during your lifetime or within five years after the original account holder passed away.

If you inherit a Traditional IRA, you’ll pay taxes on any distributions you take. Rollover, SEP, and SIMPLE IRAs become Inherited Traditional IRAs. In contrast, with an Inherited Roth IRA, you don’t pay taxes on distributions.

Speak with an experienced estate planning attorney who is well-versed in the rules regarding inherited IRAs to protect your inheritance and what may one day become your children’s inheritance.

Reference: nj.com (December 20, 2018) “Inheriting an inherited IRA? Your payout choices will be limited”

Holden & Campbell, LLC – Annapolis Estate Planning

Tax Cutting in Retirement - Annapolis Estate Planning

You’ve been making deposits in these retirement accounts for years, if not decades.  But do you really understand how they save you money in taxes?

Most of us are very responsible about making our regular contributions to 401(k), 403(b) or IRAs, but when it comes to really knowing why this is a good move for your retirement, most people can’t articulate it. A recent article from Forbes, “Want To Cut The Taxes In Your Retirement Money?” explains how this works.

We should begin by looking at how your money gets taxed if it’s not in a tax-deferred account. Investments like CDs that are held at a bank or brokerage firm are considered short-term investments.  These investments are taxed as a short-term gain at your marginal tax rate, which could be as high as 39.6%. If your gain is considered a long-term gain, then it is taxed at long-term capital gains rates, which could be as high as 20%.

For your retirement savings, you can use tax-deferred investments such as a 401(k) or an IRA. For these investments, the government doesn’t tax your savings when you deposit it, and you’re not immediately taxed on any gains you make. Instead, the money can accumulate much more quickly and grow to much larger account balances, since you’re not paying taxes on your investment (at least until you withdraw it). If you participate in a company-sponsored retirement plan, such as a 401(k) or 403(b), you may save up to $18,500 annually. If you’re over 50, you can put away an additional $6,000 annually as a “catch up” contribution. A traditional IRA only lets you contribute $5,500, with an additional $1,000 for the over 50 “catch-up” contribution.

Unlike a taxable account (such as a CD), where you have the possibility of short or long-term gains, all future earnings, (including the savings in a 401K or IRA that never got taxed) will be taxed at your future income tax rate, when the money is withdrawn. You must be mindful of the withdrawal rules or face some significant financial penalties. For 401(k) or IRA accounts, with limited exceptions, you cannot withdraw funds before age 59½, without triggering a 10% penalty. Later, at age 70½ you must begin withdrawing Required Minimum Distributions (RMDs), or pay a 50% penalty on the amount you should have taken. Note: you must pay income taxes on any amount you withdraw from these retirement accounts.

A Roth IRA or Roth 401(k) are different from their traditional cousins, because your contribution is taxed today. In other words, your contribution dollars are post-tax as opposed to pre-tax like 401(k) or IRA contributions. However, similar to a 401(k) and IRA, your investments earnings are not taxed, and neither are your withdrawals.

Roth IRAs and Roth 401(k)s allow you to withdraw your money without tax or penalty starting at 59½. However, unlike the 401(k) and traditional IRA, you don’t pay taxes on the gains (you paid taxes on your original savings when it was deposited into the Roth). There are penalties for withdrawals before age 59 ½, but if you don’t pull more out than you contributed, they don’t apply.

There are as many investing strategies for taxable or tax-deferred accounts, as there are mutual funds—countless numbers. Some investments are likely to lead to greater gains than other investments. However, whatever your investment earnings are, you will be paying taxes on them, at some point.

Be cautious and don’t act without good advice. Taking money out of tax-deferred accounts before age 59 ½ can become very expensive, very quickly, because of taxes and early withdrawal penalties. If your retirement plan includes retiring before 59 ½, good for you—but be careful. You could find yourself back at work, just to pay off your taxes!

Reference: Forbes (August 10, 2018) “Want To Cut The Taxes In Your Retirement Money?”

Holden & Campbell, LLC – Annapolis Estate Planning

Can I Trade Options in My Roth IRA? – Annapolis Estate Planning

There are opportunities to trade options using Roth IRAs, but investors must follow many of the rules that apply to traditional IRAs. That includes restrictions on withdrawals and limitations on certain trading strategies and the types of securities that can be traded.

From the time they were introduced, Roth IRAs were quickly adopted by many Americans. The appealing features: you pay taxes on contributions, but generally not on withdrawals, and not on capital gains in the future. It’s a good option for those who expect taxes to be higher after retirement. However, there’s even more that you can do with a Roth IRA.

In Investopedia’s article, “Trading Options in Roth IRAs,” the use of options in Roth IRAs and some important considerations for investors are examined. Unlike stocks themselves, options can lose their entire value if the underlying security price doesn’t reach the strike price. This makes them much more risky than the traditional stocks, bonds, or mutual funds that are typically in Roth IRA retirement accounts.

Although risky, there are situations when they might be good for a retirement account. Put options can be used to hedge a long stock position against short-term risks, by locking in the right to sell at a certain price. Covered call option strategies can be used to generate income, if an investor is okay selling her stock.

Many of the riskier strategies in options aren’t permitted in Roth IRAs, because retirement accounts are designed to help individuals save for retirement—not become a tax shelter for risky speculation. Investors should understand these restrictions to avoid issues that could have potentially costly consequences. IRS Publication 590 has several of these prohibited transactions for Roth IRAs. The most important is that funds or assets in a Roth IRA can’t be used as security for a loan. Since it uses account funds or assets as collateral by definition, margin trading usually isn’t allowed in Roth IRAs to comply with the IRS’ tax rules and avoid any penalties.

Roth IRAs also have contribution limits that may prevent the depositing of funds to make up for a margin call, placing more restrictions on the use of margin in these accounts. In addition, the IRS rules imply that many different strategies are off-limits, such as call front spreads, VIX calendar spreads and short combos. These all involve the use of margin.

It’s also important to note that different brokers have different regulations, when it comes to what options trades are permitted in a Roth IRA. The brokers permitting some of these strategies, have restricted margin accounts, where some trades that traditionally require margin are permitted on a limited basis.

A word of caution: these strategies depends on separate approvals for certain types of options trades, and some may not be permitted. Traders need to have substantial knowledge and experience to avoid taking on too much risk. Remember that Roth IRAs were not designed for active trading. An experienced investor may be able to use stock options to hedge their portfolios against losses, or generate income. However, if you are using your Roth IRA funds as a speculative tool, you may want professional input to ensure that you are not creating problems with the IRS, or putting your retirement at risk.

Reference: Investopedia “Trading Options in Roth IRAs”

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Three Thoughts on Retirement Finances - Annapolis Estate Planning

These are common questions discussed when planning retirements: Social Security, women and retirement, and couples adjusting to retirement together.

While every article about when to start taking Social Security benefits focuses on delaying as long as possible, until age 70, to maximize the monthly payment you receive, there are a few exceptions. As discussed in this article from Financial Planning, “The 1 reason not to delay Social Security,” people who are in poor health or have received a terminal diagnosis have no need to delay.

While the benefit will be less if they file early, the greater number of individual payments will help offset the smaller benefit amount.

There are three ways that women can plan for a better retirement. Women should not rely solely on their spouses when planning for retirement. Instead, they should more directly participate in how they’ll secure their senior years. That’s because many of them are likely to live longer than their partners, according to an article from MarketWatch. Women should calculate the amount of income they anticipate receiving in retirement and consider other income streams.

In addition, they can talk about their estate plans with their spouses and family members and look for alternative income sources. One example is an immediate annuity. In the right circumstances, they can be a terrific strategy to improve one’s retirement prospects.

Remember that despite not having a 401(k), individuals can still save for retirement. Workers who don’t have the option of a workplace retirement plan, should ask their employer to set up one on the basis of incentives that the company will receive.

These workers can also look into opening a health savings account and an individual retirement account, preferably a Roth IRA, which offers tax-free growth on savings and penalty-free early withdrawals.

They also can choose to switch their status to a 1099 from a W-2 employee to establish a SEP IRA.

Finally, living together in retirement can be difficult for couples who are used to having work as a diversion. To overcome the obstacles, couples should talk about retirement and be honest about their expectations, rules, and disappointments. They should also find a common ground, if they have different interests. There’s nothing wrong with wives and husbands having separate interests or even separate friends, as long as they balance their time apart with quality time together.

A healthy and fulfilling retirement has many moving parts, from finances to recreational pursuits. Advance planning for all aspects will make it a more rewarding chapter of your life.

Reference: Financial Planning (October 25, 2018) “The 1 reason not to delay Social Security”

Holden & Campbell, LLC – Annapolis Estate Planning

Roth IRA Contribution Rules You Need to Know - Annapolis Estate Planning

The IRA is the backbone of many people’s retirement savings plans, and the Roth IRA is a particular favorite. A Roth lets you take withdrawals tax free at any time and tax-free withdrawals of earnings on contributions after a five-year holding period, as long as you are at least 59 ½, using the money to buy your first home or disabled. That’s a great deal for many Americans!

All you have to do to meet the requirements for having a Roth IRA, says Investopedia in the article, “Roth IRA Contribution Rules: The Basics,” is work for a living. That can be earned income that you get from a job, including commissions, tips and taxable fringe benefits, or net earnings for the self-employed.

A couple with a large difference in incomes might want to add the higher-earning spouse's name to a Roth account to increase the contribution limits. However, the IRS says you can’t maintain joint Roth IRA accounts. There is a way to contribute larger amounts, if your spouse establishes his or her own IRA. A spouse who works can also contribute to a Roth IRA for a nonworking spouse (with sufficient income). However, remember that your contribution may be restricted or barred if your income is too high. Roth IRA contributions are phased out when your Modified Adjusted Gross Income (MAGI) is more than a set limit for your tax filing status.

There is no minimum or maximum age for making Roth IRA contributions. The fact that you participate in a qualified retirement plan doesn’t affect your eligibility to make Roth IRA contributions. The maximum contribution for 2018 is $5,500 ($6,500 if you’re 50+ by the end of the year). An annual contribution can’t exceed earned income.

Conversions to a Roth IRA from a taxable retirement account, like a 401(k) plan or a traditional IRA, don’t have any effect on the contribution limit. However, making a conversion adds to MAGI and may mean a phaseout of your Roth IRA contribution amount. Rollovers from one Roth IRA to another also aren’t taken into account in making annual contributions. Roth IRA contributions can be made up to the due date of the return for the year to which contributions relate. Therefore, contributions to a Roth IRA for 2017 could have been made through April 17, 2018, as that was the due date for the 2017 income tax return. Getting an extension of time to file a tax return, doesn’t give you more time to make an annual contribution. You can also make a Roth IRA contribution by having the IRS apply some or all of a tax refund.

Contributions to Roth IRAs aren’t tax deductible, because they’re done with your after-tax earnings. A Roth IRA is tax-free income for the future, but you may be eligible for a tax credit, of 10-50% on the amount contributed to a Roth IRA. Low- and moderate-income taxpayers may qualify for an additional tax break—the Saver's Credit, which is a retirement savings credit up to $1,000, based on your filing status, MAGI, and Roth IRA contribution.

You don’t have to report your Roth IRA contribution on your federal income tax return. However, you should keep track of it. This will help you show you’ve met the five-year holding period for taking tax-free distributions of earnings from the account.

When you make a Roth IRA contribution, the custodian or trustee will send you Form 5498. Box 10 of this form shows your Roth IRA contribution. Retain this form with your tax returns records for each year that you make a Roth IRA contribution.

There is one downside, but it’s far outweighed by all the benefits as described above. Contributions to Roth IRAs are not tax deductible, and they are made with your after-tax earnings. However, the idea is that you are creating tax-free income for your future. And that is well worth it!

Reference: Investopedia “Roth IRA Contribution Rules: The Basics”

Holden & Campbell, LLC – Annapolis Estate Planning

More Information Equals A Better Outcome in Retirement Planning - Annapolis Estate Planning

Most people who work for a living dream of retirement. However, for many workers, the idea of retirement comes with its own worries. Will there be enough money? Will I be healthy enough to enjoy it?

Money and health are the two biggest worries about retirement. There are other unknowns: where will we live? How long will we be able to travel? What’s all this about paying estimated taxes, and how does Medicare work? Getting prepared for retirement will be less stressful, says the article “3 Ways to Approach Retirement More Confidently,” from The Motley Fool, if you follow these steps:

Start with a budget. The chances are that you don’t know how much money you spend every month. You’re working, money comes in and it goes out.  However, if you know how much money you are spending, and what you are spending it on, you’ll be able to have a handle on how much money you’ll need for retirement. You’ll also be able to see where your discretionary dollars are going and make a conscious decision, as to whether those are dollars that should be going into long-term savings for your retirement.

Remember that while some expenses may go down—like commuting—others will stay the same. You won’t be going to the office every day, but you will want to enjoy yourself. What will your leisure and entertainment activities be, and how much will they cost? How will you handle health care costs?  You should also remember that there will be quarterly taxes to be paid.

The more information you can pull together about your spending, savings and unavoidable costs like taxes and health care, the better you’ll be able to plan for this next phase of your life.

How much income will your retirement accounts provide? We tend to focus on how much we need to save, but we should really focus on how much income our retirement savings will generate. How much will your IRA or 401(k) provide on a monthly basis?

Let’s say you’ve saved $500,000 in time for retirement. If you use an annual 4% withdrawal rate, which is the going rule these days, you’ll only have $20,000 a year generated for annual income. If you add Social Security to that amount, you may find that it’s not enough to enjoy the lifestyle you’ve anticipated for retirement. You may find that part-time employment can fill the gap, or you may need to work for a few more years.

Be smart about Social Security. Despite your years of saving, you will likely come to rely on Social Security to pay some of your bills. The smarter you are about your filing strategy, the better positioned you’ll be to maximize your Social Security benefits. If you wait until your Full Retirement Age, you’ll get the full monthly benefit you’re entitled to. If you can hold off claiming your benefits until age 70, you’ll max out as the monthly benefits increase every year you delay claiming.

One of your key resources as you move towards your retirement years will be your estate planning attorney. The process of creating an estate plan will also answer some of your questions about what retirement will bring and planning for aging now will give you a lot more confidence about enjoying your early years of retirement.

Reference: The Motley Fool (September 23, 2018) “3 Ways to Approach Retirement More Confidently.”

Holden & Campbell, LLC – Annapolis Estate Planning

Single Parents Need to Plan and Balance for Financial Stability - Annapolis Estate Planning

Without the security of a spouse’s income, single parents must balance their children’s needs with their own retirement savings goals.

Single parents who have to say no to their children over and over again, struggle with wanting to say yes when money is tight and there’s no room in the budget for the latest fashions or games.  However, the last thing a single parent wants to do is convey a lack of financial discipline. A financial plan can help a single parent stay on track.

CNBC’s recent article, “Five financial essentials for single parents,” says that when single parents try to satisfy their kids, it can lead to a severe unintended consequence: placing their children ahead of their own retirement needs.

In addition to naming a guardian in a will, there are five other critical financial moves.

1. Set up an emergency cushion. A solid emergency fund is the initial step. You should have three to nine months' expenses in that fund. Don’t forget to add whatever costs the kids have each month, like sports and activity fees, school lunches, clothing, and school supplies.
2. Check on the right amount of insurance. Life insurance can help your family cope financially without your income. Your income could be lost through illness, so consider disability insurance. If you own a home, purchase flood insurance.
3. Create definitive savings goals. You most likely have things that you'd like to do for your family, such as purchase a home, pay for college or plan a special vacation. Each of these will be on a different timeline. Divide this into near-, medium-, and long-term savings goals. Your near-term goals will happen within five years. The way in which you invest these three silos of money is based upon your unique time horizon. If you have decades before you retire or need to pay tuition for a newborn, you can take on more risk. Examine your allocation among these accounts and review them once a year, to see if the amounts you're putting in each—and the investment strategies—still match your goals.
4. Have a set savings percentage. There's no set number that works for everyone. There are recommendations to save at least 6% or 9% of your income, but it’s not always possible. If you can only save $30 a month, do it and be glad! Just creating a positive habit of saving is important. Even if you save as little $10 a month, do it with the notion that you'll increase the amount, when your finances permit. A good rule of thumb is to put away 10% of your gross, not take-home, pay and as you get raises, increase your savings rate. Developing that disciplined habit of saving can help you accomplish many of your financial goals.
5. Make your retirement plan. With your savings and Social Security, achieving a 50% replacement of income may be enough for people with modest salaries. However, a person who earns $100,000 will be more likely to want 85 to 90% of income. Therefore, they’ll have to save more. In sum, the more you have, the more you’ll need to save to be able to spend the same amount of money and live the same way in retirement.

For those lucky enough to work at a company with a retirement plan, contribute as much as you can, especially if your employer offers a match to your IRA contribution. If your company does not have any kind of retirement savings plan in place, the next best thing is to set up your own IRA and have money taken from your paycheck automatically. How much you save is up to you, but saving something is better than nothing.

Reference: CNBC (August 20, 2018) “Five financial essentials for single parents”

Holden & Campbell, LLC – Annapolis Estate Planning

Don’t Make This Common Estate Planning Gaffe: Check Your Beneficiary Designations – Annapolis Estate Planning

When was the last time you even remembered which of your accounts have beneficiary designations? If you don’t remember, it’s time to check them.

Life insurance, IRAs, bank accounts and investment portfolios all have beneficiary designations.

Investopedia says that outdated beneficiary designations can cause problems in its article, “The Importance of Updating Retirement Account Beneficiaries.” There have been many cases of retirement account owners who have been divorced and remarried, but failed to update their beneficiary designations.

If you forget, you may find that your designated beneficiary isn’t who you want it to be. That can frequently be the case in the event of a divorce, remarriage or if new children or grandchildren were welcomed to the family since your retirement plan account was started. If you named a charity as your beneficiary years ago, it may no longer exist.

It is good if you are reviewing your estate plan regularly. However, remember that retirement accounts aren’t part of your estate and aren’t governed by the provisions of your will, so it is important to keep these retirement documents updated.

Retirement account beneficiary designations are often neglected: they don’t get the attention they need!

Failing to update beneficiary designations can be very frustrating for the family. They’re the ones who will need to go to court to get a legal determination of the true beneficiary. The judge’s decision may not be what the deceased would have wished.

There can also be an issue, if some children are named as beneficiaries, but the document isn't updated to include those who were born after the initial designation. That’s why you should update your beneficiary designation right after any change in family status—and review it periodically, so they never are out-of-date or incorrect. You should always have a contingency beneficiary.

Another option is to draft customized beneficiary designations to address "what-if" situations.

If you don’t name a beneficiary, the beneficiary may be determined by federal or state law, or by the plan document that governs your retirement accounts. For qualified plans like profit-sharing plans, 401(k)s, and money purchase pension plans, federal regulations automatically designate the spouse of the account owner as the beneficiary. The spouse has to approve of any other designation, and this must be in writing and notarized. If the retirement account owner is single, her estate may be the default beneficiary.

An IRA plan's documents also provide a default designation, if the designated beneficiary predeceases the IRA owner. The default options vary among IRA custodians and trustees. While the default options rid any administrative responsibilities from account owners, they may not reflect their preferences. As a result, account owners should review the plan document and be certain that they update their beneficiary designations regularly.

Many IRA plan documents have default beneficiary options, so if you designate two people as your beneficiaries and one predeceases you, the share that belonged to the deceased beneficiary automatically goes to the surviving beneficiary. If you have a customized designation, you can instruct how that portion would be distributed, instead of having it default to the surviving beneficiary.

When you sit down with a qualified estate planning attorney, make a complete inventory of your assets and include the names of your beneficiaries and contingency beneficiaries. Don’t leave this detail out, or you’ll risk creating a real problem for your family.

Reference: Investopedia (2018) “The Importance of Updating Retirement Account Beneficiaries”

Holden & Campbell, LLC – Annapolis Estate Planning