“Just like the state, if you don’t have a plan in writing, the IRA has a plan for you”
If the distribution of your property is important to you, you can use a will or a trust to give instructions about who gets what when you die. If you die without a properly executed estate plan, state law will determine how the probate court will divide and distribute the things you own. Of course, the state of Georgia’s estate plan won’t take your particular wishes into account. So, most people prefer to put their own plan into place.
Many people are surprised to learn that even a will or a trust may not control the distribution of savings held in IRAs. Fortunately, IRAs can easily transfer to your loved ones outside of probate simply by completing a beneficiary designation form. The IRA will be distributed the person or persons you designate. The forms must be kept current, because the IRA will go to the person whose name you put on the form even if you have since divorced that person or written them out of your will.
The IRA can be assigned or transferred into a properly titled new account, but then again some IRA custodians simply refuse to do this, making the irreversible and catastrophically taxable choice to distribute the entire account to the estate. Simply put, an IRA not acting like an IRA within the estate plan is messy. It can be easily avoided by filling out the beneficiary form and keeping it up to date.
The best way to avoid the risk of unhappy and unexpected results is to put your wishes in writing by keeping IRA beneficiary forms and wills and trusts complete and up to date. If you don’t put your plan in writing, the assets you have worked hard to earn will not be distributed according to your wishes, but by rules of the IRA and laws of Georgia. By consulting with loved ones and qualified legal and financial professionals, you can develop a plan for the future and execute the best documents to make your plan a reality. The time to start is now.
James M. Miskell received his law degree from the University of Georgia in 1993. His Asset Protection and Estate Planning Law practice is located in Lawrenceville, Georgia. He offers free educational workshops and consultations to assist clients as well as fellow professionals in creating individualized solutions.