Question: Is naming your estate as beneficiary of your IRA a good idea?
Answer: Generally, the answer is an emphatic no! Once the IRA is paid to your estate, there cannot be a ‘designated’ beneficiary. If there is no designated beneficiary, there is no life expectancy which means the stretch IRA opportunity is lost for the beneficiaries.
If you want to get the stretch payout for the beneficiaries of the IRA, you do not want the IRA to name the estate as beneficiary because the whole idea of stretching is to have a life expectancy payout. An estate is not a person so it cannot have a life expectancy.
Moreover, naming an estate as beneficiary turns an IRA (usually a non- probate asset) into a probate asset.
So, designating your estate as beneficiary of an IRA is a double whammy. You turn a non-probate asset into a probate asset AND your heirs lose the ability to stretch the payments.
As always, if you have any questions or would like to learn more, please contact Steve Shane at firstname.lastname@example.org or .
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Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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