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What happens to an IRA after its owner dies?


Many people in the Kent area have an IRA that they are using for retirement. These funds accumulate over the years and provide money for a person when they enter retirement. Many times, a person does not use all of their IRA money before they die. So, what happens to the rest of the IRA retirement benefits after its owner dies?

The beneficiary of the IRA is typically the person who receives the IRA after the owner dies, regardless of a will that may state otherwise. If there is not a beneficiary listed, or the beneficiary is not valid, then the will dictates who receives the IRA.

Those who inherit an IRA can opt to cash out the IRA. They would then pay income taxes on the amount they withdraw. They could also elect to take out regular distributions on an annual basis, using a life expectancy calculation. If it is a surviving spouse that is inheriting the IRA, the spouse could roll the assets in that IRA into their own IRA.

An IRA is often a large amount of a person's retirement income. It is important that a person keep their beneficiary information updated. It is also important that a family has a thorough estate plan to make sure all of their assets are protected and they are able to leave the legacy that they intended.

An attorney who specializes in estate planning can help their client create an estate plan or review and update their current estate plan. They have the knowledge and skills necessary to make sure their clients' needs are met, both now and into the future.

Source: fool.com, "What happens to an IRA when its owner passes away?", Dan Caplinger, Feb. 18, 2017

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