Trusts, IRAs and Inheritance Pitfalls in Virginia

Inherited irasMost people aren’t aware that their wills or trusts don’t have the final say concerning assets held in retirement accounts — 401(k) plans and individual retirement accounts (IRAs). The beneficiary provisions of these accounts supersede those of trusts.

With few exceptions, your trust is the most important element to your estate plan. However, that doesn’t mean it’s the last say in all matters. Keep your trust updated, but also be sure to keep track of all of your accounts and your beneficiary designation forms or else your estate might swiftly break apart and into the wrong hands.

This is one of those topics we have to repeat every so often so that each beneficiary designation you sign (or don’t) will stick with you as the important document that it is. A new echo came in the voice of Yahoo News in a recent article titled “How Your Ex-Spouse Could Inherit Most of Your Money.

Beneficiary designations are convenient little legally-binding documents that allow you to simply list who should receive the account if you’re not around to do so. The trouble is that this “legally-binding aspect” also allows beneficiary designations to run parallel to the trust, and often over and above it. In fact, naming someone as beneficiary on the account-provided form can even undo anything you say in the trust about who should receive what. So, say you name a spouse as a beneficiary to your IRA, and then you divorce but fail to change the designation. That spouse will still get the IRA even if you intend for everything to go to the kids, your sibling or any other party. Your Ex is named on that legally-binding designation, so it’s theirs.

Keeping these kinds of beneficiary forms all together and updated is often among the more important aspect of your estate planning, but not necessarily the only important element. Proper planning is about mindfulness with regard to all of these little asset details and proper organization of them.

You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

Reference: Yahoo News (May 23, 2014) “How Your Ex-Spouse Could Inherit Most of Your Money


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