Catherine M. Censullo CPA
Tax Tip

Life Planning & Estate Planning Is Different for IRAs - Part I

Did you know that IRAs are different than all other assets? 

They are distributed differently than all other assets both during life and after death and have special rules that need to be followed.


Did you know that IRAs pass by contract, and generally not by your will? 

That is why it is important to check your beneficiary designation forms, and to make sure that they are kept up to date.  Keep a copy of the document on hand and check to make sure that your IRA custodian has a copy of the latest form on file. 

The beneficiary designation form takes precedence over your will. 

This is important when you establish the IRA and when you have life changes, such as a marriage, a divorce, the birth of a child, the death of a relative, etc.  It is always good to check with your IRA custodian on an annual basis to make sure their records reflect the correct beneficiaries on your accounts.

Take the case of a Brooklyn man by the name of Bruce Friedman, who was left nearly destitute back in 2005 when his wife Anne, died suddenly of a heart attack.  The annual statement from the custodian indicated that no beneficiary form was on file, so Bruce thought he would be entitled to the money.  After Anne died, the custodian found a form filled out in 1974 before the couple was wed naming her mother, uncle and sister as beneficiary.  The only surviving relative, her sister, was awarded close to $1,000,000.  Don't let this happen to you.

It is also important to designate both primary and contingent beneficiaries.  The primary beneficiary can always disclaim the assets upon your death, and let the assets pass to the contingent beneficiaries.  This may allow you to stretch the IRA over the life of younger beneficiaries.

If you would like to make an appointment to go through my complete beneficiary checklist to make sure nothing has been overlooked, please give me a call.

Catherine M. Censullo, CPA

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