Beneficiary IRAs
A beneficiary is a person that receives the benefits of a retirement account when the account owner passes away. This designated person can be a spouse or a non-spouse, such as a child, sibling, relative, or even a friend. At Next Generation, we require that all beneficiaries complete new account documentation in order to receive the benefits of the inherited account. Below are explanations of what you are allowed to do with an inherited retirement account, depending on your relationship with the decedent, and how to understand self-directed retirement accounts.
If you are a spouse...
If you are the spouse of the deceased account owner, you have options. One of the benefits of being a spousal beneficiary is that you have the option to treat the account as if it were your own. Otherwise, you would simply treat the account as if you were a non-spouse beneficiary.Treating the account as your own means that you have the option to make contributions to the account and roll over amounts into and out of the account. The decision on how to treat the account is ultimately up to you and we recommend that you consult with a trusted advisor equipped to help you make informed decisions about what to do with the account.
If you are a non-spouse...
Unfortunately, if you are a non-spouse beneficiary you do not have the option to treat the account as if it were your own. This means that you cannot make any contributions to the account and you cannot roll over amounts into or out of the account.However, you do have the option to make a trustee-to-trustee transfer so long as the inherited account is in the name of the deceased for the benefit of the beneficiary. As stated above, we recommend that you consult with a trusted advisor equipped to help you make informed decisions about what to do with the account.
Being the beneficiary of a self-directed account...
As the beneficiary of a self-directed retirement account, you may be wondering what they are and how they work. Self-directed IRAs are similar to your regular IRAs, with the only difference being the types of investments you can hold within them. These types of investments are non-publicly traded, alternative assets, that include real estate, private equity, hedge funds, secured and unsecured notes, precious metals, cryptocurrency and more.Due to their nontraditional nature, when you're dealing with an inherited IRA, you may not understand how to handle these assets. Therefore, we also recommend that in addition to speaking with a trusted advisor, you also consult with the asset manager in order to determine if the asset is eligible for liquidation or what would be required to maintain it.
When you inherit a retirement account...
The first step in this process is to establish an account. As stated above in our introduction, we require that new account documentation be completed in order for any beneficiary to receive the benefits of the inherited account. The required documents to open the account are as follows:- Completed & Signed Application (3 Pages)
- Completed & Signed Fee Schedule
- Completed & Signed Client Release Form
- Completed & Signed Credit Card Authorization Form
- Government Issued Photo ID or Passport
- Certified Copy of Death Certificate
Note: In certain cases, the Certified Copy of Death Certificate may be requested prior to completing a new account application to confirm the client's passing.
The account will be set up/established in the name of the decedent for the benefit of (FBO) the beneficiary. Once this happens, we will send out a Welcome email that will include the account number. From here, the next step would be the transfer of assets from the original account to the new beneficiary account which is facilitated through our transactions team. Finally, the asset can either be held and managed as-is or, if eligible, be liquidated.
For information on distribution or required minimum distribution (RMD) rules, you may read through IRS Publication 590-B.
In all, Next Generation is here to guide you through the process of setting up your inherited account and help you better understand your options. Please do not hesitate to reach out if you have any questions or concerns. We will do our best to provide you with the answers you are looking for, and if we cannot, we will point you in the direction of the type of person/service who can.
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Administration Provided by Next Generation Services, LLC
75 Livingston Avenue, Suite 304 | Roseland, NJ 07068
Phone 973.533.1880 | Toll Free 888.857.8058